CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange moved higher in early trading Tuesday, retracing a portion of Monday's selloff, as market participants consider the effects of the omicron variant on global oil demand.
Monday's selling pressed the oil contracts to test their early December lows plumbed following news the fast-moving COVID variant that emerged from South Africa having reached Europe in late November, with new cases spiking in Europe that have prompted a series of government responses, including travel restrictions and reinstating lockdowns. Overnight, Thailand is reported to have reinstated mandatory quarantines, with tightening COVID restrictions in Asia again risking further supply chain disruptions that have fanned inflation.
U.S. President Joe Biden is scheduled to speak Tuesday on additional measures his administration is taking to address COVID, which reportedly will include buying 500 million COVID-19 at-home tests to distribute for free, and to increase the number of testing sites. Emergency medical teams will also be sent to hospitals in some states, with spiking cases having overwhelmed some hospital staffs, including in states such as New York where a vaccine mandate has sidelined 8,500 health workers. The Federal Emergency Management Agency has been ordered to work with states to make available more hospital beds ahead of an expected surge in cases.
Centers for Disease Control and Prevention said Monday the omicron variant now accounts for 73% of new U.S. COVID cases. The World Health Organization said the new variant has been found in 43 states in nearly 90 countries globally. Where there is community transmission, the number of cases is doubling in 1.5 to 3 days.
The Imperial College COVID-19 response team on Dec. 16 issued a report that found "strong evidence of immune evasion" both from natural infection and vaccine-induced protection, and that the risk of natural reinfection from omicron is 5.41 times higher than for the delta variant.
Omicron cases have been mild overall compared with previous COVID strains, with both the rapidity in new cases and the less lethal strain an historic precession in how pandemics end. However, WHO said it is "unwise" to assume omicron is mild.
The surge in COVID cases in Europe is expected to again dent consumer sentiment in the Eurozone, which fell to a negative 6.8 in November and is seen declining to a negative 8. Exorbitant energy costs are also seen to again having derailed consumer confidence, including in Germany where a survey on consumer climate for January by Growth From Knowledge released overnight declined from a negative 1.8 to a negative 6.8 that was well above market expectations for a negative 2.5.
European Commission will release its survey findings on consumer sentiment at 10 a.m. EST.
Earlier this month, the Organization of the Petroleum Exporting Countries downplayed the extent to which omicron would slow oil demand, expecting the latest surge in cases to quickly diminish. While revising lower its estimates for world oil consumption in the fourth quarter due to European containment measure and the emergence of omicron, it said "the impact of the new omicron variant is projected to be mild and short-lived, as the world becomes better equipped to manage COVID-19 and its related challenges."
This estimation prompted OPEC to revise first quarter 2022 world oil demand expectations up 1.11 million barrels per day (bpd) to 99.13 million bpd, with the rationale that the oil demand recovery that slowed against expectations in the second half of 2021 would be realized early next year.
In early trading, NYMEX February West Texas Intermediate was up $1 near $69.65 barel (bbl), with ICE February Brent up a similar amount to $72.50 bbl. NYMEX January ULSD futures gained a little more than 3 cents to $2.2040 gallon and January RBOB futures were up 2.3 cents at $2.1130 gallon.
Brian L. Milne can be reached at firstname.lastname@example.org