Omicron rattles oil fields, but impact is unclear, although oil markets are uncertain
Nov 29 (Reuters) - The Omicron coronavirus variant dropped oil prices late last week and has reduced refining margins, but with crude futures rallying on Monday, the impact may be limited.
Travelers have been restricted to travel through governments across the world, allowing them to limit the spread of Omicron, originally discovered in southern Africa, as scientists race to see the degree of danger.
Analysts said the Friday sell-off had been excessive., the largest daily drop since April 2020, crude prices lowered more than 10% on Friday, but recovered some of those losses on Monday.
Refining margins have risen significantly, boosting the impact of new coronavirus curbs that had already been introduced in Europe.
European diesel barge refining margins reached a three-month low of about $8 per barrel on Friday, despite oil price volatility lowering trading liquidity.
Jet fuel cargo margins were compared at approximately $7.7 per barrel, near a two-and-a-half month low.
"This broad-based correction refuted worries that the Omicron variant would become a huge obstacle to oil demand," bank JP Morgan explained, recalling Friday's price hike.
However, it stated that demand revival from the epidemic will continue, even though consumption forecasts had weakened before last week's sell-off.
The fluctuation raises the chances of a meeting by the Organization of the Petroleum Exporting Countries and allies, which will take place this week, when producers nations will assess their concerns about demand, with pressure from consumer nations facing inflationary pressure from still high oil prices.
According to KY Lin, spokesman for Taiwan's Formosa Petrochemical Corp, further price rises might be limited by investor caution because of Omicron.
Data revealed that Singapore's complex margins, a barometer for Asian refiners' profitability, stood at $2.36 per barrel on Monday, dropping to the lowest since June 30, after falling to the lowest since June 30, Refinitiv data revealed.
Marges rose by $8.45 per barrel only a month ago, the highest since September 2019.
Because of the Omicron variant, an official at a prominent South Korean refiner who refused to be named said he saw "drastic reductions in refining margins."
Travel curbs may especially be used to counter the recovery of jet fuel prices, which reached a record high of $13.50 per barrel in mid-October in 2021, according to Reuters predictions, primarily in accordance with their levels in October 2019.
Air travel, on the other hand, is a relatively minor part of the global oil demand.
"The announced and enacted international air travel restrictions cannot explain such a sharp drop (in crude prices)," added Norbert Rucker, head of economics at Julius Baer. "Air travel represents around 5%-7% of global oil demand."
The total market is also expected to be bolstered by demand from power generators, which have switched to using oil as natural gas supplies.
According to a Beijing-based consultancy, who declined to be named owing to company policy, China, the world's largest fuel consumer, may continue to provide support it its strict border controls manage to limit the spread of Omicron.