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Oil eases on worries Omicron

Oil futures fell on concerns that rising coronavirus cases worldwide could reduce crude demand, as new doubts emerged about the efficacy of vaccines against the Omicron variant.

Brent futures fell 76 cents, or 1.0 percent, to $74.39 a barrel, while WTI crude in the United States fell 38 cents, or 0.5 percent, to $71.29.

The Organization of Petroleum Exporting Countries (OPEC) increased its forecast for global oil demand in the first quarter of 2022. Nonetheless, it kept its full-year growth forecast, claiming that the Omicron variant would have a minor impact as the world adjusted to the COVID-19 pandemic. To prevent the spread of the Omicron variant, governments worldwide, most recently the United Kingdom and Norway, tightened restrictions.

At least one person died in the United Kingdom after contracting Omicron, marking the first publicly confirmed death worldwide from the rapidly spreading variant.

This year, Zhejiang, a central manufacturing province in China, battled its first COVID-19 cluster, with hundreds of thousands of residents quarantined. China is the world’s largest crude oil importer, and those barrels could come under pressure fairly quickly if Covid spreads unchecked in the world’s most populous country. OPEC and its allies, known as OPEC+, will decide on their output policy.

At the group’s next meeting, Iraq’s oil minister predicted that OPEC would maintain its current policy of gradually increasing supply by 400,000 barrels per day.

Oil markets may be in for a rough patch as reduced exploration and drilling investments threaten to reduce crude production by 30 million barrels per day by 2030. Meanwhile, according to government data, crude output from the Permian basin, the most significant oil shale formation in the United States, is expected to reach a record high in January.

Natural gas prices in Europe rose 11% on Monday, owing to colder forecasts and concerns that Gazprom’s (MCX: GAZP) PAO’s Nord Stream 2 gas pipeline from Russia to Germany will remain closed if Russia renews its aggression against Ukraine.

This pipeline would help boost European gas supplies, which were at an all-time low for this time of year. Higher gas prices should boost demand for oil as European manufacturers and power generators switch from scarce and expensive gas to oil to fuel their facilities.

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