Crude oil futures were higher in mid-morning Asian trade Nov. 30, extending overnight gains, as investors continued to see current oil prices as a bargain though uncertainty over the impact of the omicron variant lingered.
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At 10:30 am Singapore time (0230 GMT), the ICE January Brent futures contract was up 66 cents/b (0.9%) from the previous close at $74.10/b, while the NYMEX January light sweet crude contract rose 93 cents/b (1.32%) at $70.88/b.
"Sentiments in Asia may ride on the positive handover from Wall Street overnight, but with the slower vaccination rate and more limited healthcare capacity in the region, uncertainty from the new omicron variant may seem to bring about higher economic risks for the region at a time where it is shifting towards further reopening," IG market strategist Yeap Jun Rong said.
Crude oil prices had risen by as much as 7% during the Nov. 29 intraday session as fears over the impact of the omicron variant ebbed, though they later pared gains to settle 1% to 2.6% higher.
While emerging reports showed the new variant might not be as severe as initially thought, analysts nonetheless cautioned that more time was needed to assess the fallout.
"Comments from the World Health Organization that the omicron variant is potentially a 'very high' global risk would have not helped market sentiment. It is still too early to sensibly assess the risk that omicron poses and this uncertainty is likely to add further volatility to the oil market," ING analysts Warren Patterson and Wenyu Yao said.
In a blow to oil demand, Japan on Nov. 29 followed Israel in shutting its borders completely to foreigners for at least a month starting Nov. 30, just weeks after it eased entry rules to the country. US President Joe Biden, however, ruled out any return to lockdowns for the US.
Meanwhile, all eyes will turn to the OPEC+ meeting taking place over Dec. 1-2 to see how the group responds to the latest development.
Russia's deputy prime minister Alexander Novak said Nov. 29 that OPEC+ will closely monitor the oil market situation, but that urgent decisions by the group are not necessary.
Russia sees the market reaction to the omicron variant as "extremely emotional" and short-lived, as there is no scientific data to back up rising fears, Kremlin spokesman Dmitry Peskov said.
Analysts remained open to the possibility of the producer group pausing its planned output hikes.
"We would not rule out the group pausing its supply increases over January," ING's Patterson and Yao said.