Weekly Oil Report: Tighter Supply and Omicron Concerns

Finally, 2022 is here and many countries are in their Christmas holidays. Stock markets and banks were almost closed as well; therefore, market activities and trade volumes were not as normal days. Crude oil started the year with gains that were stimulated by the supply cuts of Libya ahead of the OPEC+ meeting. Brent opened at $78.15 and WTI opened at $75.35 on Monday, January 3, 2022. OPEC+ will probably follow its gradual supply increase and add 400,000 barrels per day in February. Libya’s supply cut along with the possible future increase of OPEC brought a slight positive sentiment to the market and we could see some growth. Yet we cannot forget about the effects of new variants of covid. Countries expect a new peak of Omicron after new year holidays due to increased transportations and travels. Considering the rapid transitions of the virus, the expectation seems rational. Two scenarios are probable in case of the outbreak:

1. The virus spread causes chaos in hospitals due to heavy symptoms with a high rate of deaths. The economies would be shut down to start a global lockdown. Therefore, prices will fall dramatically once again.
2. Infected cases of Omicron increase but due to the mild symptoms, countries would not feel the urge to shut down industries. In this scenario, the prices get stabilized between $70-$80.

Analysts and economists believe that crude prices will stay at an average of $73.57 a barrel in 2022. The consensus has decreased compared to August. Petrochemical markets were also less active under the influence of holidays. Prices, however, are rising alongside the positive sentiments of the crude oil market.