Global financial markets are being roiled by fears over a new coronavirus variant from South Africa. The variant is said to be more transmissibles than other variants, like for example Delta, and to be more resilient to antibodies. Moreover, while it has been first reported recently, it is already widespread in South Africa. Some Asian countries, like Singapore, already decided to ban arrivals from South Africa. If the new variant is as dangerous as believed, it seems to be just a matter of time until other countries decide to impose restrictions. As was seen during previous pandemic relapses, cross-border travel tends to be the first target of new restrictions.
This is a big risk to oil demand and one should not be surprised by the massive drop in crude prices today. This situation also shows that OPEC+ may have been right when expecting oil demand drop at the turn of 2021 and 2022. While the cartel could not predict a new, more dangerous virus strain, it had expected pandemic to intensify during the winter season. As a result, it looks even more likely that OPEC+ will decide to change its output hike policy during a meeting next month and decide on a slower pace of monthly increases than previously agreed 400k bpd.
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Open account Try demo Download mobile app Download mobile appA look at OIL.WTI chart at H4 interval shows that crude price has been trading in a downward channel since the beginning of November. Price jumped to the upper limit of the channel at the beginning of this week after a rather disappointing strategic reserve release announcement. Nevertheless, all of those gains were erased already and now WTI is testing a support zone near the $73.60 handle. This zone is marked with 50% retracement of the upward move launched in August, previous price reactions as well as the lower limit of the channel.
Source: Station5
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