Omicron threatens recovery in oil demand, already affected by increasing COVID cases in Europe, Energy News, ET EnergyWorld
Governments around the world have imposed travel restrictions on travelers from southern Africa over the weekend to limit the spread of the Omicron, first detected in South Africa. Scientists are rushing to find out if it is more transmissible or causes more serious disease than the existing variants.
It comes as refiner margins in Asia and Europe had already taken a hit in recent weeks as many European countries reimposed restrictions on coronaviruses to contain rising COVID-19 cases.
The double whammy threatens to derail the global economic recovery and by extension demand for oil, which the International Energy Agency plans to increase from 5.5 million barrels per day (bpd) to 96.3 million of bpj in 2021.
“At a time when many lanes of traffic are reopening, this is a setback,” said Howie Lee, an economist at Singapore’s OCBC bank.
“We need at least two weeks to determine what impact this new variant will have on the demand for oil.”
Concerns over the new variant caused oil prices to plummet on Friday into meager post-Thanksgiving volumes.
Oil prices plunged more than 10% on Friday – their biggest daily drop since April 2020 – but had recovered only part of those losses on Monday at 06:08 GMT, rising to more than 3% on the day . Analysts said Friday’s massive sales were excessive. [O/R] Brent, WTI Crude Futures, https://fingfx.thomsonreuters.com/gfx/ce/klpykdaaepg/Pasted%20image%201638160222388.png
Singapore’s complex margins, a barometer of the profitability of Asian refiners, stood at $ 2.15 a barrel on Friday, the lowest since June 30, according to data from Refinitiv.
Just a month ago, margins peaked at $ 8.45 a barrel, the highest since September 2019.
“We are seeing drastic drops in refining margins in recent days due to concerns over the rapidly spreading variant of the Omicron coronavirus,” said an official at a major South Korean refiner, noting the growing number of country imposing travel restrictions as a result of the new variant.
“On the refinery side, we are facing a double whammy – lower oil prices and lower refining margins, which would likely worsen our profitability.”
The person declined to be named due to the sensitivity of the matter. Asia Refining Margins Slip From 2 Year Highs, https://fingfx.thomsonreuters.com/gfx/ce/egpbkardzvq/Pasted%20image%201638159705598.png
Despite a weaker outlook for jet fuel, some analysts expect gasoline demand to remain strong for now as most governments have yet to impose national restrictions on movement due to the Omicron variant. .
“The demand for planes will go away, but I think the gasoline will stay there,” said a Singapore-based analyst who declined to be named due to company policy.
“Europe was already heading for lockdown, so it’s a wash, so it’s more about (gasoline demand in) the United States and Asia.”
In China, strict border controls could keep Omicron away from the world’s largest oil importer, while lower prices could benefit Chinese refiners and consumers, an analyst from a Beijing-based consulting firm said.
“This is bad news for the world but good news for China, as oil prices have fallen dramatically,” said a China-based analyst, who also declined to be named due to the policy of the company.
(Reporting by Florence Tan in Singapore and Heekyong Yang in Seoul; editing by Ana Nicolaci da Costa)