(Bloomberg) — Oil edged higher after a broader market selloff on Monday as investors assessed the outlook for demand amid the rapid spread of omicron.
Futures in London climbed near $72 a barrel on Tuesday after falling almost 5% over the past two days. Prices tumbled in the previous session on concerns about rising infections and after President Joe Biden’s economic plan suffered a setback. While the omicron variant of the virus hasn’t had a big impact on demand so far, there are fears that it may lead to renewed lockdowns.
Crude’s rebound from the pandemic has faltered toward the end of the year, in part due to the emergence of the new Covid-19 strain ahead of winter. The oil market structure is flashing bearish signs, indicating near-term over-supply, which may require OPEC+ to act when they meet next month.
“The big story is really the spread of omicron,” said John Driscoll, the chief strategist at JTD Energy Services Pte. “It’s a psychological impact more than anything. OPEC+ has got the ability to manage the market if it gets really bad.”
Omicron accounted for 73% of all Covid-19 infections last week in the U.S., according to Centers for Disease Control and Prevention data. Almost all of the remaining cases were of the delta strain. London hospitalizations were 34% higher than a week ago and the city canceled a New Year’s Eve event.
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The rout across financial markets on Monday was exacerbated by Senator Joe Manchin’s rejection of Biden’s roughly $2 trillion package. The President spoke to Manchin on Sunday, however, a conversation that the White House believes left the door open to revive talks on the spending plan, according to a person familiar with the matter.
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