Oil prices rose early on Tuesday for the second day in a row, as traders are cautiously optimistic that the new Omicron COVID variant would not lead to massive lockdowns around the world to the point of severely reducing global oil demand.
Oil prices had started to rebound on Monday after Saudi Arabia signaled optimism about demand by hiking its official January crude oil selling prices for Asia and the United States—its biggest markets. Amid heightened worry about the course of the pandemic after the emergence of Omicron, Saudi Arabia injected a dose of confidence in markets by raising its official selling price for its flagship Arab Light to a nearly two-year high.
The market was also relieved on Monday that early reports into Omicron have shown milder symptoms, although the variant is thought to be much more transmissible.
“Although it’s too early to make any definitive statements about it, thus far it does not look like there’s a great degree of severity to it,” the White House’s chief medical advisor, Dr. Anthony Fauci, told CNN on Monday, but cautioned it was still too early to make sweeping assessments of the severity of the variant. “The signals are a bit encouraging,” he added.
“Investors have begun to recalibrate their assessment of the economic impact of the Omicron, setting aside the worst fears triggered by news of the heavily-mutated variant about 10 days ago,” Vanda Insights said in a note on Tuesday.
“Yesterday’s optimism can quickly turn into gloom again unless scientific evidence confirms that the economic impact of the latest variant is, in fact, negligible. Yesterday’s impressive performance is being followed-through this morning, partly due to a decent jump in Chinese crude oil imports last month,” broker PVM Oil Associates commented on the oil market on Tuesday.
Finally, a stalemate in the Iran nuclear talks is also bullish for the market, with Germany saying on Monday that Iran should return to the talks with realistic proposals that don’t breach previously reached compromises.
By Tsvetana Paraskova for Oilprice.com
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