Global oil prices continued to gain ground above $80 per barrel on Friday, helped by a growing consensus that demand remained surprisingly resilient to the current Omicron-led wave of COVID-19 cases which spooked markets in late 2021.
Brent crude futures, which traded close to $83 per barrel earlier on Friday, had fully recovered from the end-of-November sell-off over initial omicron fears, with OPEC+ boosting oil output for a seventh consecutive month amid waning fears that the variant would trigger large-scale lockdowns.
S&P Global Platts reported that hospitalisation levels in many countries with high vaccination rates continued to lag well behind soaring infection rates, and the head of the World Health Organization said on Wednesday that the more infectious Omicron variant appeared to produce less severe disease than the globally dominant delta, adding however that it should not be categorised as “mild.”
Oil demand markers in most of the world’s biggest oil-consuming countries hit post-pandemic highs by late December, according to Google data, despite initial mobility curbs in many countries to slow the spread of omicron.
“As far as the oil market is concerned, at the end of the day it’s about lockdowns, it’s about restrictions that matter and people’s behavior,” Kang Wu, Head of Global Macro, Demand & Asia Analytics at S&P Global Platts, said.
“This quarter is a concern but it’s still on track for growth this year…compared to the front page news on the explosion of omicron and cases. The [GDP] picture is more stable, the economy is still growing with risks.”
Although global mobility in the world’s biggest oil consumers fell sharply at the end of the year and first days of 2022, according to Google data, the slump reflected the seasonal holiday period slowdown. In India — where Christmas and the Gregorian New Year holidays are little celebrated — mobility slipped from post-COVID highs in late December in the week to Jan. 3. But mobility in the world’s third-biggest oil consumer remains above pre-COVID levels which it hit in mid-November, the Google data showed.
The global economy returned to 2019 levels in the second quarter of 2021 and rebounded by 5.7 per cent over the year. At the start of December, S&P Global trimmed its growth outlook for 2022 slightly, down from 4.4 per cent to 4.2 per cent, citing COVID-19 and inflation risks.
But some market watchers were cautiously optimistic that demand would continue to recover strongly, potentially fueling higher prices if oil supplies were unable to keep up.
Damien Courvalin, head of energy research at Goldman Sachs, viewed omicron as a short-term risk to prices, with 2022-23 remaining a “structural bull market” supported by the fact the global economy had become more resilient to the crisis.