The new strain reignited demand concerns, with oil prices down $3 from a two-week high

On Thursday (Dec.
9), crude oil fell 2.
39% to close at $74.
01 / barrel, after a higher of $
76.
70 earlier.
Recent data shows that Omicron is 4.
2 times more contagious than Delta in its early stages, and the new variant of the virus could hit crude oil demand
by causing more countries to impose new restrictions.

On Wednesday (December 8), British Prime Minister Boris Johnson imposed tighter restrictions in England, saying people should work from home as much as possible, wear masks in public places, and show vaccine passes to enter certain events and venues
.
Denmark also plans to introduce new restrictions, including the closure of restaurants, bars and schools
.
Rebecca Babin, senior energy trader at CIBC Private Wealth Management, said the market is still in calibration mode
around the pandemic.
The market initially priced in a worst-case scenario for Omicron, but then "underestimated" how the government would respond
.

As reported on Wednesday (December 8), preliminary trials showed that a booster shot of the Pfizer-BioNTech vaccine could neutralize the variant Omicron
.
Commerzbank analyst Carsten Fritsch said yesterday's news about the effectiveness of the third shot certainly gave people hope.

Still, Omicron will lead to more countries imposing new restrictions on public life
.

Concerns about Asian demand also weighed
on the market.
Saudi Arabia raised prices despite weak physical demand, and buyers in the region did not seek additional supply
thereafter.
Rating agency Fitch downgraded
two Asian property companies in debt crisis on Thursday (December 9).
Louise Dickson, an analyst at Rystad Energy, said the news heightened concerns about economic growth in the Asian giant and could eventually affect the willingness of the world's largest crude consumer to buy oil
.

The emergence of the Omicron variant caused the price of Brent crude oil to plunge by 16%
from November 25 to December 1.
More than half of its losses have been recovered this week, but analysts say further recovery may be limited
until Omicron's impact becomes clearer.

Shin Kim, head of supply and production at S&P Global Platts, said in the company's 2022 Energy Outlook report that a large part of the consumption growth in 2022 will come from jet fuel, as well as rising demand for other petroleum products such as automotive
fuels.
Oil demand growth is on solid footing, with demand expected to grow between
3 million and 6.
4 million barrels per day next year.
Still, the tone of the energy market will depend on the pace of supply growth, with production needing to rebound to meet demand
after two years of shrinking inventories.
Iran's resumption of supplies will have the biggest impact
.

"If we don't think about Iran and there is a major supply disruption elsewhere, that means the real question will be whether we're going to test $100/b oil prices
," Kim said.
The market is entering a period of seasonal oil price weakness, but oil prices should rebound
after May as rising demand tightens supply.
Crude oil prices will return to the $80 per barrel level
around mid-2022.
”