COVID 19: Oil dips for 5 consecutive weeks
The black liquid benchmarks had one of their worst weekly performances last week with both contracts losing over $10 a barrel on Friday, representing their largest one-day drop since April 2020.
Both benchmarks were set to reverse their four-week losing streak, posting over 3% gain as at mid-week. However, a new variant of the coronavirus, which is reportedly vaccine-resistant, caused panic selling of the black liquid.
Also, adding to the selling pressure is the coordinated release of oil reverse to the public, orchestrated by the United States. Earlier in the week, the U.S. Department of Energy announced the release of 50 million barrels of crude oil from the Strategic Petroleum Reserve (SPR).
The global benchmark, the Brent crude closed the week down 7.82%, currently trading $72.72 a barrel, after losing 11.55% on Friday. The United States benchmark, the West Texas Intermediate (WTI) crude, for the week, dropped by 10.45%, currently trading $68.15 a barrel, after losing 13.1% on Friday.
The World Health Organization has designated the new variant, named ‘Omicron’, as “of concern”, according to the South African health minister. This caused developed economies to quickly enact travel restrictions. The United States, Canada, Britain, Guatemala and European countries are among those to restrict travel from Southern Africa, where the variant was first detected.
Another factor affecting the price of oil is the release of SPR. So far, China, India and the United Kingdom, all joined the United States in this attack on rising oil prices. Japan and South Korea also announced that they are joining the U.S. in this crusade.
The oil market is not the only market to sell off as global equities markets also followed suit. The Dow Jones Industrial Average ended the trading session down by 2.53% with its basis points at 34,899.34. This decline represents the indexes largest percentage drop in more than a year. European stocks also saw their biggest sell-off in 17 months as the FTSE 100 lost 3.64%, with its basis point currently trading 7,044.03.