Oil prices dropped on Thursday, after seeing gains from four sessions on positive comments from vaccine makers about the Omicron variant, even as some governments stepped up curbs to stop its rapid spread.
U.S. West Texas Intermediate (WTI) crude futures dropped 93 cents, or 1.27%, to $71.72 a barrel, after a 0.4% gain in the previous session.
Markets were buoyed by comments from BioNTech and Pfizer that a three-shot course of their COVID-19 vaccine may protect against infection from the Omicron variant.
“Early indications of the Omicron variant… suggest that it may be less severe than initially feared given hospitalisation rates have not surged,” Commonwealth Bank commodities analyst Vivek Dhar said in a note.
“A third vaccine dose is also showing promising signs of protection against the new variant,” he said.
However market gains were muted as governments reimposed restrictions to limit the spread of Omicron, including Britain ordering people to work from home again, Denmark closing restaurants, bars and schools and China halting group tourist trips from Guangdong.
South Korea is seeing record infections while cases remain elevated in Singapore and Australia.
“The risks to demand have not entirely diminished,” ANZ analysts said in a note.
The Omicron outbreak sparked a 16% slump in Brent prices from Nov. 25 to Dec. 1. More than half of the drop has been recouped this week, but analysts say a further recovery may be limited until Omicron’s impact is clearer.
“The stalling of market prices suggests that investors are struggling to find a direction,” said Wang Xiao, a lead researcher at Guotai Junan Futures, pointing also to uncertainty about supply increases by producer group OPEC+, which groups OPEC and allies including Russia.
Elsewhere, U.S. and Israeli defense chiefs are expected on Thursday to discuss possible military exercises that would prepare for a worst-case scenario to destroy Iran’s nuclear facilities should diplomacy fail and if their nations’ leaders request it.
Early winter storms in southern Russia were hampering oil operations in Black Sea ports, delaying cargoes and increasing costs.
OANDA analyst Craig Erlam said Brent is likely to face resistance around the lower end of the $76.50-77.50 range, which was a key support level in late September and late November.