Crude oil trading reminder: Be wary of the US Omicron strain weighing on oil prices, and pay attention to the OPEC+ production policy

At the beginning of the Asian market on December 2, U.
S.
crude oil rose slightly to $66.
30 a barrel, oil prices fell nearly 2% on Tuesday, the first case of the Omicron variant in the United States, and the surge in confirmed cases of the new crown in South Africa sparked concerns that the Omicron variant could cut oil demand
at a time when global supply is increasing.

At the beginning of the Asian market on Thursday (December 2), U.
S.
crude oil rose slightly, now at $66.
22 / barrel, oil prices fell nearly 2% on Tuesday, the first case of the Omicron variant in the United States, and the surge in confirmed cases in South Africa, sparking concerns that the Omicron variant could cut oil demand
at a time when global supply is increasing.

During the day, the focus was on the number of layoffs of challenger companies in the United States in November, the number of jobless claims in the United States for the week ended November 27, the OPEC+ Joint Ministerial Supervisory Committee, and the OPEC+ Ministerial Meeting of Oil Producing Countries; At 00:30 on Friday, a number of Fed officials spoke
.

[OPEC+ begins to discuss output policy, analysts expect a pause in production increases is more likely]

OPEC+ began a two-day policy meeting where delegates debated
the planned increase in production.
There are growing predictions that the threat of new virus variants will suspend OPEC+ production
.
Ministers of member states have been tight-lipped about this
.

Iraqi Oil Minister Ihsan Abdul Jabbar Ismaael, one of the very few officials who has talked about production, said he would abide by the meeting's resolution
whether or not production was increased.
Most analysts and traders believe that a pause in production increases is more
likely.

The oil market situation has changed
sharply recently.
Over the past month, major consumers such as the United States have urged OPEC+, led by Saudi Arabia and Russia, to increase supply faster, but the emergence of the Omicron variant has sent crude prices into a technical bear market, and even a modest increase in production looks risky
.

Diamantino Azevedo, Angola's Minister of Mineral Resources and Oil, said: "Suddenly a new and possibly more dangerous variant has emerged, and a new lockdown may follow
.
In these uncertain times, OPEC+ must remain cautious and be ready to act proactively when market conditions require it," OPEC ministers decided on the balance of the oil market to be discussed
at Thursday's meeting.

【U.
S.
crude oil inventories fall】

The U.
S.
Energy Information Administration (EIA) said Wednesday that U.
S.
crude inventories fell last week and gasoline and distillate inventories rose as demand weakened
.

As the U.
S.
economy booms and demand increases, crude and refined product inventories have been declining
overall.
This week's report reversed that trend, even if only temporarily, and reinforced
the bearish sentiment that has weighed down oil prices in recent days.

U.
S.
crude inventories fell by 910,000 barrels to 433.
1 million barrels in the week ended Nov.
26, and gasoline and distillate inventories, including diesel and jet fuel, both rose much more than expected
.
U.
S.
gasoline inventories rose by 4 million barrels this week compared with an expected increase of 29,000 barrels
, the EIA said.

Distillate inventories, which include diesel and heating oil, rose by 2.
2 million barrels versus an expected increase of 462,000 barrels
.
As an indicator of demand, total gasoline products supplied by refiners fell 6 percent in the latest week, though weekly figures were erratic
.
Over the past four weeks, gasoline product supply was 9.
2 million b/d, unchanged
from pre-pandemic levels in 2019.

Phil Flynn, senior analyst at Price Futures Group in Chicago, said, "Gasoline demand has fallen
significantly.
Part of the reason may be the drop in holiday demand, so the market won't panic too much," the EIA said, adding that refinery refining fell by 9,000 barrels
per day last week.
Refinery capacity utilization increased by 0.
2 percentage points
.

[U.
S.
corporate employment rose 534,000 in November]

U.
S.
companies continued to hire steadily in November, suggesting employers continue to gradually fill near-record highs
.

Data released Wednesday by the ADP Research Institute showed that corporate employment rose by 534,000 in November and revised to an increase of 570,000 in
October.
Economists surveyed by Bloomberg expected a median increase of 525,000.

The data shows a steady improvement in the labor market; Skill mismatches, employee job changes, and pandemic-related factors continue to make it difficult for employers to attract and retain employees
.
Total employment, calculated by ADP, remains well below pre-pandemic levels, while the emerging omicron strain could curb labor force
participation.
On Friday, the U.
S.
Department of Labor will release monthly nonfarm payrolls, which are expected to show a 525,000-strong
increase in private sector employment in November.

[Bank of America maintains oil price forecast of $85/b next year]

Bank of America maintains its oil price forecast of $85 a barrel next year and could break $100 if air travel
rebounds.
Francisco Blanch, the bank's head of commodities, said in a speech on Wednesday that the Omicron variant could "derail the recovery a little, but we don't know how the pandemic will develop
.
" ”

Blanch also noted that the United States does not intend to resume previous epidemic prevention measures to stop the spread of the variant, and that treatments will also be rolled out
within two months.
The bank expects global oil demand to reach 100.
5 million b/d
next year.
However, in addition to the Omicron strain, oil prices still face other potential risks, including more releases of the Strategic Petroleum Reserve and the easing
of Iranian sanctions.

[US-Russia tensions over Ukraine heat up]

The United States has accused Russia of stepping up preparations for a possible invasion of Ukraine and threatening to retaliate more aggressively against Russia, indicating that tensions around Russia's troop surge at the border continue to rise
.

U.
S
.
Secretary of State Antony Blinken warned at a NATO meeting in Latvia on Wednesday that if Russia invades Ukraine, the United States will implement "high-impact economic measures that have been avoided in the past.
"

Putin said in the Kremlin earlier Wednesday that "threats to our western border are rising," and that "the stakes are serious
for us.
" Such-for-tat rhetoric suggests that tensions between the United States and Russia will continue to escalate, despite insistence on both sides that they want to de-escalate the situation
.

[California found the first case of Omicron strain infection in the United States]

The U.
S.
Centers for Disease Control and Prevention (CDC) confirmed the first case of infection with the Omicron variant in the United States, further confirming that the strain has spread to much of
the world.

According to the CDC, public health departments in California and San Francisco have confirmed that a recent case of new coronavirus infection in California was caused by
the Omicron variant.
The case returned to the United States from South Africa on 22 November after being fully vaccinated
.
The patient has developed mild symptoms and has now improved and has been self-isolating since he tested positive
.
All close contacts have been contacted and tested negative
for the virus.

California Governor Gavin Newsom said at a news conference that the case departed for San Francisco on 21 November, landed the plane the next day, and developed symptoms
on 25 November.
Testing was completed on 28 November and showed positive
the next day.
The patient was not hospitalized
.
Newsom said at a press conference that "the infected person is now in good condition" and expects a full recovery
.

The Omicron strain, originally detected in South Africa, has spread to Australia, Germany and Canada
.
Researchers are gearing up to study the effects of
the new strain.

The US "Business Insider" website quoted Charedi Dean, a former official of the California Department of Public Health and a public health expert, as saying that based on mathematical model analysis of the number of international travelers in the United States, he estimates that there are now about 2,000 Omicron cases in the United States, and the reason why it has not been reported so far is only because the United States has not genetically sequenced
enough virus samples.

[South Africa's single-day confirmed new crown cases nearly doubled]

With the Omicron strain taking root, the number of confirmed coronavirus cases in South Africa in a single day nearly doubled
from Tuesday.
According to the National Institute of Communicable Diseases (NICD) of South Africa, the country has 8,561 confirmed cases in the last 24 hours, with a test positivity rate of 16.
5%.

The institute said in an earlier report that 74 percent of the 249 samples of coronavirus patients genetically sequenced in South Africa in November had found the variant Omicron, while the Delta strain accounted for much less than in
October.
However, hospitalization rates, while rising, are far less than at the peak of previous waves of
infections.
According to NICD data, 135 people were admitted to hospital with coronavirus in the last 24 hours, bringing the total number of hospitalizations
to 2,550.

[S&P 500 sends biggest two-day drop since October 2020]

U.
S.
stocks posted their biggest two-day drop since October 2020 as traders assessed the latest progress
after the U.
S.
confirmed its first case of infection with the Omicron variant.
The S&P 500 rose nearly 2 percent on high volume earlier Wednesday before closing to give up gains, with the tech-heavy Nasdaq 100 underperforming major benchmarks and giants such as Tesla and meta Platforms Inc.
tumbling
.

South Africa said the number of coronavirus cases had almost doubled from Tuesday, and the number of cases of new variants in Britain, Switzerland and Brazil had also risen
sharply.
The WHO chief scientist noted that existing vaccines may prevent severe disease associated with the strain, and traders also evaluated Fed Chairman Jerome Powell's speech, in which he once again stressed that the Fed will control inflation and that officials should consider accelerating the tapering
.

Adam Crisafulli, founder of Vital Knowledge, said: "Risk aversion is the main reason, but there are many more factors at play, the market is not very confident in this morning's rally itself, and investors are still trying to understand not only the Omicron strain, but also the Fed's new response mechanism
.
" The Fed's Beige Book said the economy was growing at a moderate to moderate pace through mid-November, with prices generally rising
amid supply chain disruptions and labor shortages.

John Kilduff, a partner at Again Capital LLC in New York, said: "When the market is hit by news about variants, you sell first and then ask questions
.
He expects further bullish momentum
to resume only if U.
S.
crude breaks above $70 a barrel.

Overall, the first case of Omicron strain in the United States has aroused further market concern, and the relevant governor of the United States said that there may be 2,000 cases of undetected Omicron strain in the United States, which further increases the risk of variant strains dragging down oil prices; During the day, the OPEC+ meeting will focus on the decision on production, and in addition, the geopolitical situation related to Russia may affect the trend of oil prices in the short term, which needs to be carefully monitored
.

At 8:17 Beijing time, U.
S.
crude oil is now trading at $66.
22 a barrel
.