(Bloomberg) — Oil fell for the first time in three days as traders grew more concerned about the demand impact from the omicron variant and tighter monetary policy.
Futures in New York slid 1.6% to trade near $71 a barrel after rising 2.3% over the past two sessions. Daily Covid-19 cases in the U.K. have jumped to a record, while hospitalizations have surged across the U.S. Prices also weakened on concern that steps by the Federal Reserve and other central banks to tame inflation will hinder economic growth.
Signs are also emerging of softening oil demand in Asia, while the International Energy Agency said this week that the global market had returned to surplus as omicron impedes travel. The weakness is showing up in the market’s structure, with Brent flicking in and out of a bearish contango, which signals oversupply.
“Crude oil is struggling amid raised concerns about the fast-spreading omicron virus and its impact on global demand,” said Ole Sloth Hansen, head of commodities research at Saxo Bank A/S in Copenhagen. “Also, unseasonal warm weather in Asia is potentially softening demand for fuels towards heating and power generation.”
This week has seen traders hit with conflicting signals on demand and supply. Those range from the central banks’ moves, to new restrictions to limit the spread of omicron, and declining inventories in the U.S. That has caused a generally risk-off attitude in oil markets, leading the aggregate volume of futures contracts to drop over the past two sessions.
Omicron is starting to limit the movement of people. The City of London district has transformed from a raucous hub with thousands of workers celebrating Christmas into a no-party zone in the space of a week. Almost half of staff didn’t go to the office on Monday, the lowest since September, according to data compiled by Google, which tracks the location of its users.
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