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The oil market’s knee-jerk reaction to the new Omicron COVID variant on Friday was overblown, according to the CEO of the world’s largest oil company and biggest oil exporter.
The market overacted on Friday, Saudi Aramco’s chief executive Amin Nasser said, Saudi-owned Al Arabiya TV reported.
Oil prices collapsed by more than 11 percent on Friday amid low liquidity in a festive long U.S. weekend, after news broke about a heavily mutated little-researched new coronavirus variant detected in South Africa. Equity markets globally also plunged, and oil led the crash in commodity markets, as participants fretted about another slowdown in global oil demand just as the market also expects a surplus next year.
Many countries banned flights from South Africa and other African countries, some—like Israel and Japan—closed borders to foreign visitors, while others, such as the UK, tightened requirements for entry by requiring all foreign visitors—regardless of vaccination status—to take a PCR test and self-isolate until they get back a negative result.
Oil prices rebounded by more than 5 percent early on Monday as the market assessed the new threat to oil demand while waiting for more information about the new COVID variant. The U.S. benchmark, WTI Crude, bounced back to above $70, at $72.72 as of 9:07 a.m. EST, after it had slid to below $70 on Friday.
Apart from clues about Omicron, the market will also be waiting this week for the OPEC+ monthly meeting on Thursday, set to decide production levels for January.
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Some analysts think that OPEC+ will decide to pause the monthly production hikes, at least in January, due to the threat to oil demand from the new variant and a likely surplus early next year.
OPEC+ will discuss potential measures at the meeting, Russian Deputy Prime Minister Alexander Novak said on Monday but noted that Russia currently doesn’t see the need for urgent measures.
“We don’t see such a need, we will carefully monitor the situation, but there is no need to rush to hasty decisions,” Novak said.
By Michael Kern for Oilprice.com
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Michael Kern is a newswriter and editor at Safehaven.com and Oilprice.com,