Recap: After falling by almost 13% on Friday, oil prices rebounded on Monday alongside a higher equities market. Traders seem to agree that the price collapse on Friday was a bit overdone. While there is a renewed threat of demand destruction due to the Omicron variant of COVID, OPEC could counter that threat by pausing its production increases. Brent momentarily climbed back above $75, while WTI briefly recaptured the $72 level. If the new variant of the virus proves vaccine-resistant or more contagious than other variants, it could impact travel, commerce and petroleum demand. Gains were pared, with January WTI settling at $69.95 a barrel, up $1.80, or 2.6%. January Brent, which expires on Tuesday, rose 72 cents, or 1% to settle at $73.44 a barrel, while the more actively traded February contract added $1.63, to settle at $73.22 a barrel. RBOB snapped a two session-losing streak, gaining 2.35%, to settle at $2.0771 a gallon.
Technical Analysis: Following Friday’s huge sell-off, a bout of corrective buying, along with speculation that OPEC and its allies may take action against Omicron, which could cut production, pushed WTI higher. The January contract worked its way back above the 200-day moving average, currently set at $69.42, now we will have to wait and see if it can hold it. There is significant support down around the Friday low of $67.40. Below this level, additional support is seen at $61.74 and $60. To the upside, resistance rests at $73.58 and above that at $75.
Fundamental News: U.S. officials told Energy Intelligence that a second SPR release is possible as early as February if oil prices remain high. Meanwhile, White House Press Secretary, Jen Psaki, said the U.S. is not reconsidering a plan to release strategic oil reserves after a drop in oil prices related to the new Omicron COVID-19 variant.
Asharq Business reported that Saudi Energy Minister Prince Abdulaziz bin Salman al-Saud was not worried about the Omicron coronavirus variant, after crude prices plunged last week on fears the new variant would cut demand. He also declined to comment on OPEC+ plans before the group's meeting on production policy this week. Separately, Saudi Arabia’s Energy Minister said an OPEC+ technical meeting was postponed until Wednesday and the OPEC+ ministerial meeting was moved to Thursday “to buy time to review things” in light of the new Omicron Covid-19 variant. He said the oil markets overacted to the new coronavirus variant.
Russia’s Deputy Prime Minister, Alexander Novak, sees no need for urgent action on the oil market over the new Omicron coronavirus variant, downplaying the possibility of changes to an OPEC+ oil supply deal this week. OPEC+ is schedule to hold online meetings this week to decide on oil production policy. On Friday, sources said OPEC+ was monitoring developments related to Omicron, with some concerned it might weaken demand. He said "in order to work it through in detail, the Joint Ministerial Monitoring Committee was moved to get more information about the current events, including on the new strain of the virus." The JMMC online meeting, which was scheduled for November 30th, will now be held on December 2nd, the same day as the main OPEC+ ministerial meeting. He said OPEC+ partners had not asked to renegotiate their current deal in response to Omicron.
Early Market Call – as of 8:30 AM EDT
WTI – Jan $66.82, down $3.15
RBOB – Dec $2.0146, down 3.54 cents
HO – Dec $2.0838, down 5.21 cents
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