Oil prices sank on Monday on fresh demand fears, even trumping supply outages in Libya and the chaos in Kazakhstan.
The Brent crude oil benchmark slipped $0.95 (-1.16%) to $80.80 per barrel, even as analysts and industry trade publications warn that there could be a significant tightening of the oil market this year.
Triggering today's oil demand worries are a new round of fears about the resiliency of oil demand in the face of the nearly 2 million new coronavirus cases as of Sunday that even high vaccination rates don't seem to be mitigating.
In Quebec, despite a ~90% vaccination rate, case counts have reached more than 15,000-a level that is nearly five times the previous record. Israel clocked 31,000 new cases over the weekend, with nearly 18,000 new cases on Sunday, rivaling its earlier record of 22,000.
But the real scare with oil demand-particularly short-term oil demand-is the fact that China recorded its first local transmission of the Omicron variant over the weekend in the city of Tianjin.
According to Morgan Stanley, the high rate of transmissibility, combined with China's zealous addressing of the coronavirus with lockdowns, could bring China's first-quarter growth down by 0.6 to 0.7 percentage points to a bit over 4% year over year, The Wall Street Journal reported on Monday.
Goldman Sachs pegs the potential hit to China's economic growth to 0.9 percentage points for the full year this year, bringing its full-year growth forecast even below 4%.
Others see Omicron having little impact on crude oil prices, and if the first trading week of the year is any indication, they just might be right. Oil prices gained more than 5% in the first trading week as supply concerns in Ecuador, Libya, and Kazakhstan outweighed the potential loss of demand from the highly transmissible variant of the coronavirus.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group. More