Crude tumbles on fears of demand hit from new COVID variant as OPEC meeting looms for next week

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Crude oil prices tumbled on Friday, as investors shed the commodity after a new strain of the potentially highly contagious COVID was detected in South Africa.

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West Texas Intermediate Crude for January Delivery CL00,
-6.19%

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CLF 22,
-6.19%
fell $4.86, or 6.1%, to $73.44 a barrel. The contract slipped 0.1% to $78.39 a barrel on the New York Mercantile Exchange on Wednesday.

Friday will mark a short session on the heels of the Thanksgiving Day holiday, with US crude oil settling at 1:30 p.m.

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Jan Brent Crude BRNF22,
-4.95%

BRN00,
-4.97%,
The global benchmark fell $3.69, or 4.5%, to $77.25 a barrel after the end of Wednesday, leaving it 0.1% lower at $82.25 on ICE Futures Europe.

Oil eased along with US stock futures and Asian equities after the discovery of a new COVID variant with a high degree of contagion in South Africa, which is experiencing a massive spike in cases in recent days. Investors put money in gold GC00,
+1.27%
and other perceived heavens such as the Japanese yen USDJPY,
-1.22%,

He said the variant was also detected in Botswana and Hong Kong among travelers who visited South Africa, currently known as B.1.1. The World Health Organization is holding an emergency meeting on Friday to assess the variant, which scientists are still not sure about is more lethal or more contagious.

But scientists say it is by far the most mutated, which could make it more permeable than the delta version, and it could make vaccines less effective.

Already countries were taking precautionary measures, with Britain barring travelers from South Africa and five other countries from Friday. The variant shock comes as Europe is grappling with a spike in cases in several countries, such as economic powerhouse Germany. Austria has locked down its population, while other countries are also imposing restrictions.

Jeffrey Haley, senior market analyst at OANDA, said: “The calculations around the OPEC+ meeting next week could change depending on how this virus-led sales develop, and how concerned the WHO is about it. “

“OPEC+ has repeatedly stated that an area of ​​caution in the wake of the COVID-19 outbreak was a resurgence of oil demand as the conglomerate ramps up production,” he told clients in a note. Haley added that OPEC+ may not increase output beyond its previously agreed 400,000 bpd target next week, “unless market conditions get really bad next week, and oil prices will experience a lot of downside.” Is.”

Traders are questioning whether the Organization of the Petroleum Exporting Countries and its allies – or OPEC+ – will decide next week to end those production increases following a coordinated release of strategic reserves by several countries, including the US.

The cartel and its allies have previously pushed back against requests by the Biden administration and others to speed up production growth. OPEC+ has raised output in monthly increments of 400,000 barrels per day as it cuts earlier output.

Saudi Arabia and Russia halt recent production growth, The Wall Street Journal reported on Wednesday, citing people familiar with the discussion.

Elsewhere in the Energy Space, January Natural-Gas Futures QGF24,
-0.73%
increased 1.1% to $5.165 per million British thermal units. December Petrol Futures RBZ21,
-5.58%
fell 0.8% to $2.3197 per gallon, while December heating oil HOZ21,
-5.80%
fell 3.8% to $2.224 per gallon.

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