Screens at the London Stock Exchange in London, the UK. Picture: BLOOMBERG/LUKE MACGREGOR
Screens at the London Stock Exchange in London, the UK. Picture: BLOOMBERG/LUKE MACGREGOR

Singapore/London — Oil prices tumbled more than 3% on Tuesday after Moderna’s CEO cast doubt on the efficacy of Covid-19 vaccines against the Omicron coronavirus variant, spooking financial markets and adding to worries about oil demand.

Stéphane Bancel told the Financial Times that Covid-19 vaccines are unlikely to be as effective against the Omicron variant of the coronavirus as they have been against the Delta variant.

Brent crude futures fell $2.32, or 3.2%, to $71.12 a barrel at 9.12am GMT after slipping to an intraday low of $70.52, the lowest since September 1. US West Texas Intermediate futures fell $2.15, or 3.1%, to $67.80 a barrel, off a session low of $67.06, the weakest since August 26.

Fed chair Jerome Powell will also tell US lawmakers later in the day the variant could imperil economic recovery, prepared remarks show.

“The economic impact is driven by fear, and by the policy response ... Fear is impacting travel,” Paul Donovan from UBS said in a note. “There are outright bans. But also the fear of being stranded, which causes travel plans to alter.” 

Oil plunged about 12% on Friday along with other markets on fears that the heavily mutated Omicron would spark fresh lockdowns and dent global oil demand. It is still unclear how severe the new variant is.

With a weakening demand outlook , expectations are growing that Opec, Russia and their allies, together known as Opec+, will put on hold plans to add 400,000 barrels a day to supply in January.

“We think the group will lean towards pausing output hikes in light of the Omicron variant and the oil stockpile release by major oil consumers,” Commonwealth Bank commodities analyst Vivek Dhar said in a note.

Pressure was already growing within Opec+, due to meet on December 2, to reconsider its supply plan after last week's release of emergency crude reserves by the US and other major oil-consuming nations to address soaring prices.

“Following the global strategic reserve releases and the announcement of dozens of countries restricting travel ... Opec and its allies can easily justify an output halt or even a slight cut,” Oanda analyst Edward Moya said in a note.

Still, Citi analysts expect Opec+ to continue to add more barrels in January. 

Reuters

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