Oil rebounds to $76 on speculation Omicron-related drop overdone

Oil rebounded by almost 5 per cent on Monday to $76 a barrel as some investors viewed Friday’s slump in oil and financial markets on concern about the Omicron coronavirus variant as overdone.

While the World Health Organisation has warned that understanding the variant’s severity could take time running into weeks, a South African doctor who has treated cases said symptoms of the variant were so far mild.

Brent crude was $3.41, or 4.7 per cent, higher at $76.13 by 0920 GMT, after sliding $9.50 on Friday. US West Texas Intermediate (WTI) crude was up $3.07, or 4.5 per cent, at $71.22, having tumbled $10.24 in the previous session.

“We saw some correction as Friday’s plunge in oil prices has been overdone,” said Tatsufumi Okoshi, senior economist at Nomura Securities.

European shares also rebounded on Monday, while safe haven bonds lost ground. Crude posted its biggest one-day drop since April 2020 on Friday as investors feared virus containment measures like travel bans would dampen demand.

“I can’t help but feel that Friday’s lows were probably the bargain of the year if you were an oil buyer, speculative or physical,” said Jeffrey Halley of brokerage OANDA.

Japan said on Monday it would close its borders to foreigners, as the world’s third-largest economy joined Israel in taking the toughest measures against the variant.

The emergence of Omicron has created a new challenge for the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, which are due to meet this week to set policy.

The group has postponed technical meetings this week to gain time to assess Omicron’s impact on demand, but Russia said it sees no need for urgent action on the market, downplaying the possibility of changes to the OPEC+ oil deal.

Also on the oil market’s radar this week, talks on reviving the 2015 Iran nuclear accord, that could add to global supply if a deal is reached, are resuming on Monday.