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Oil Plunges 5% on Fear That Existing Vaccines Can’t Stop Omicron -Breaking

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© Reuters.

By Barani Krishnan

Investing.com – Oil prices took a hit for a fourth time in five days, with traders warning that the U.S. crude benchmark could even slip beneath the key $60-per-barrel support, on fears that existing vaccines in the market may not be able to stop the spread of Covid’s newly-discovered Omicron strain.

After a low of $64.44, WTI (or the benchmark crude oil price) fell $3.47 or 5% to $66.18 per barrel. WTI lost nearly 16% from its Nov. 23 positive close at $78.50, This is nearly 23% less than the $85.41 high reached seven years ago in October.

Brent-traded crude oil, which is the international benchmark for oil, closed down 2.87 percent or nearly 4% at $70.57. Brent is down nearly 11% since the close positive of $82.31, a week ago. The price is down 19% since its high of $86.70 in mid-October, which was a seven-year-high.

“There will be some relief bounces from here, but it is all part of greater volatility due to uncertainty,” Samir Madani of tankertrackers.com said in a tweet. “The compass is spinning and we’re drifting in foggy waters for the next couple of weeks. Expect more downside followed by a rocket once Omicron consensus has been reached.”

More importantly, if the present rut isn’t contained, WTI could break below the $60 support based on Tuesday’s chart action alone in the U.S. crude benchmark, some traders warned.

“The fact that we broke below the 200-day SMA (Simple Moving Average) of $65 sets up for a trigger of the $60 support,” said John Kilduff, founding partner at energy hedge fund Again Capital, said. 

“Of course, there are several other SMA markers from $64 to $61 that need to be taken out first,” said Kilduff. “But if the market gets no redemption from either Covid-related fears or supportive OPEC+ action in coming days, then sub-$60 could happen.”

OPEC+, the global oil producers’ alliance, is to hold its monthly meeting on Thursday. Most traders expect the alliance — that groups the 13-nation Organization  of the Petroleum Countries led by Saudi Arabia with 10 other oil producers steered by Russia — to stop the additional 400,000 barrels per day it has either pumped or pledged to pump since July amid heightened demand for crude before the Omicron discovery. 

WHO or the World Health Organization stated that Omicron had a very high chance of infecting people as countries closer their borders. It could also cause economic collapse after the pandemic, which lasted two years. Some experts believe the Omicron variant may be less severe than originally thought.

Tuesday’s plunge in oil came after the chief executive of drugmaker Moderna (NASDAQ:) The prediction that Omicron vaccines would be less effective than previous strains of coronavirus was made by NASDAQ. They warned that it could take several months for pharmaceutical companies to manufacture Omicron-specific jabs on a large scale.

“There is no world, I think, where [the effectiveness] is the same level . . . With [the] Delta [variant],” Stéphane Bancel told the Financial Times in an interview. According to him, the Omicron mutations in the spike protein that infects human cells and the rapid spread in South Africa of the variant suggest that vaccines will need to change next year.

“I think it’s going to be a material drop,” Bancel added. “I just don’t know how much because we need to wait for the data. But all the scientists I’ve talked to . . . are like, ‘This is not going to be good’.”

 

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