By Barani Krishnan

Investing.com: Oil prices fell for the second consecutive day on Tuesday. The benchmark U.S. crude oil price dropped below the $70/barrel support on Tuesday due to a weaker demand outlook from the International Agency due the Omicron variation of Covid.

According to the IEA, global oil markets have reverted back to surplus but will be facing an oversupply in early next year when the Omicron impacts international travel. The Omicron has reduced the IEA’s forecast of global oil demand for the first quarter by 600,000.

This warning was issued on the exact same day China confirmed its Omicron cases. Given Beijing’s much-publicized zero-tolerance policy to new Covid outbreaks and the variant’s high transmissibility, this could result in the fresh closures of factories and workplaces in the world’s largest crude importer.

On Tuesday, the Asian Development Bank reduced its growth projections for 2022 from Covid-related uncertainties and risks.

The IEA has revised its outlook for demand by 100,000 barrels/day, both for the rest of 2018 and 2022. “The surge in new Covid-19 cases is expected to temporarily slow, but not upend, the recovery in oil demand that is under way,” the Paris-based agency said.

Analysts were unable to believe that.

“​​To  me, the only concept that keeps oil from going higher is lower demand,” said Scott Shelton, broker at ICAP (LON:) in Durham, North Carolina. 

“I just don’t believe the supply story and think that while we may build next year, we probably won’t get back to the 5 year moving average,” Shelton wrote in a note. “The supply just isn’t there! The fact that oil stocks are increasing with higher crude runs is a problem. I would have thought the crude data would have been better.”

To be sure, the EIA’s version of events contrasted with that of the Organization of the Petroleum Exporting Countries’  report earlier this week that raised its world oil demand forecast for the first quarter of 2022.

Many countries across Europe already have new mobility restrictions. However, many are facing protests. U.K. Prime Minister Boris Johnson faced a revolt in parliament on Tuesday after his warning earlier in the week of a “tidal wave” of Omicron cases to come. 

The market’s broader pessimism about demand, however, pushed crude prices lower.

After oscillating between sessions highs of $72 or lows of $69.53,, which is the U.S. benchmark crude oil, dropped $1.35 (or 1.9%) to $69.94/barrel at 1:01 PM ET (18:00 GMT). WTI rose 8.1% last week. After a 7-year-high of $85.41 mid-October, WTI fell to $62.48 for Omicron-related worries.

After a high of 75.14, and low of $72.58, London-traded was at $72.97. Brent gained 7.7% in the last week. Brent fell 7.7% last week to $65.80 after falling from $86.70 mid-October 2014 to a low of $65.80.