Oil prices swung around as OPEC and its allies surprised markets by deciding to go ahead with an increase in crude output in January
London (AFP) - Oil prices swung sharply on Thursday as OPEC+ decided to go forward with a scheduled production hike despite the threat Omicron may stifle energy demand.
Equities trading was also driven by the pandemic as traders reacted to the latest developments regarding the Omicron variant and efforts by countries to handle the upswing in cases of the Delta strain.
Oil prices had been rising strongly ahead of the meeting of OPEC and its allies amid expectations they would pause their modest monthly crude production increases given the added uncertainty Omicron brings to global demand.
However, prices dropped by two percent as the oil producers decided to go ahead with a planned increase of 400,000 barrels per day in January.
“Demand concerns were already on the rise and the last thing crude oil bulls were expecting to hear was another rollover of the current policy from the OPEC+ group,” said analyst Fawad Razaqzada at Think Markets.
“Yet contrary to some expectations for only a moderate hike or no hike at all for January, that’s exactly what happened,” he said.
Oil prices later recovered their losses and stood higher as European equity markets closed for trading.
Razaqzada said the production hike will completely remove the threat of supply shortages at a time when demand is expected to fall.
In equities trading, Wall Street was moved higher, recovering part of the losses suffered on Wednesday on the news that the Omicron coronavirus variant had been found in the United States.
In European trading, Frankfurt and Paris slid 1.4 and 1.3 percent respectively after a mixed Asian session.
- Omicron ‘hysteria’ -
“The danger is that with all the hysteria and noise around Omicron, the Delta variant is still more prevalent and continues to wreak havoc across Europe, as well as bringing the health service in Germany to its knees,” said market analyst Michael Hewson at CMC Markets.
“This may help explain why the DAX is struggling after reports that unvaccinated people in Germany will face strict restrictions on their movements, with only vaccinated people allowed into restaurants, cinemas, and non-essential stores, in a move that smacks of vaccine apartheid,” he added.
London stocks lost 0.6 percent, with drug maker GlaxoSmithKline shedding 0.5 percent despite news that its Covid antibody treatment appeared to be effective against Omicron.
Traders have been feeling uneasy in recent weeks on concerns about the sharp rise in prices around the world caused by supply chain snarls, a spike in energy costs and a labour shortage, as well as the prospects that may push policymakers to quickly raise interest and harm the global economic recovery.
The announcement about Omicron – and warnings that vaccines may not be as effective against it – sent them over the edge on Friday.
Experts say it will take weeks to fully understand the true danger of Omicron, though the World Health Organization said vaccines would probably fend off the worst of the variant.
- Key figures around 1630 GMT -
New York - Dow: UP 1.7 percent at 34,596.79 points
EURO STOXX 50: DOWN 1.5 percent at 4,117.36
London - FTSE 100: DOWN 0.6 percent at 7,129.21 (close)
Frankfurt - DAX: DOWN 1.4 percent at 15,263.11 (close)
Paris - CAC 40: DOWN 1.3 percent at 6,795.75 (close)
Tokyo - Nikkei 225: DOWN 0.7 percent at 27,753.37 (close)
Hong Kong - Hang Seng Index: UP 0.6 percent at 23,788.93 (close)
Shanghai - Composite: DOWN 0.1 percent at 3,573.84 (close)
West Texas Intermediate: UP 2.0 percent to $66.85
Brent North Sea crude: UP 1.6 percent at $69.99
Euro/dollar: DOWN at $1.1309 from $1.1317 at 2125 GMT on Wednesday
Dollar/yen: UP at 113.05 yen from 112.78 yen
Pound/dollar: UP at $1.3311 from $1.3271
Euro/pound: DOWN at 84.97 pence from 85.27 pence