Oil prices plummeted 10% from the previous day’s closing on Friday. They partly were driven down by the new Covid-19 variety discovered in South Africa.
The price of a barrel of West Texas Intermediate (WTI) for January delivery was down 11.30 percent to $69.53. North Sea Brent crude for delivery in the same month declined 10.23% to $73.81.
According to Craig Erlam, an analyst at Oanda, “oil is slipping because to fears about the new variant” of Covid-19.
This new strain, now known as B.1.1.529, has been discovered in South Africa. It has the potential to spread swiftly, according to scientists, who are unsure if the vaccines currently available are effective against it.
Several European countries have already opted to halt flights from southern Africa as of Friday. Others, such as Japan, have imposed quarantines.
“The concern that others would impose further confinement and travel restrictions is harming crude even more,” said Thinkmarkets’ Fawad Razaqzada. According to Erlam, investors are concerned about “the impact of these travel restrictions,” whether they are current or future. “Even if there are no severe limitations, individuals will be more cautious, putting downward pressure on demand,” he predicts.
OPEC+ is the focus of attention.
These additional factors “had a devastating impact on oil prices overnight,” according to Tamas Varga of PVM earlier in the day. A decline that was reinforced at the start of the U.S. session.
Market participants and observers will be paying more attention to “how OPEC+ will take into consideration the risk to demand from this new version, as well as the impact of key oil-consuming countries releasing strategic reserves,” according to Han Tan of Exinity.
Through the Opec+ agreement, members of the Organization of Petroleum Exporting Countries (Opec) and their allies will gather next Thursday to deliberate on the future of their joint supply of black gold early next year.
This approach is currently burying a reserve of more than 4 million barrels each day. Several significant consumers, including the United States, are pressuring them to open their black gold tap quicker than they are currently doing in order to reduce the price rise that is impacting on the economy’s recovery.