Oil extended declines - falling more than 5% - hampered by the rapid spread of the omicron virus variant and turmoil for U.S. President Joe Biden’s economic plans.
Futures in London tumbled below $70 a barrel, as wider markets also retreated. Infections are rising from the U.S. to Europe as authorities struggle to tame the spread of omicron. That’s led to restrictions on air travel and stricter curbs on movement, creating fears that will flow through to weaker energy demand, though there’s no sign of the massive hit seen early last year just yet.
Oil’s market structure is also showing signs of weakness. The prompt timespread for Brent once again flipped into a bearish contango pattern on Monday, indicating the market is becoming oversupplied.
Bearish headwinds are mounting, moving into the holiday period, when thinner trading volumes can exacerbate prices swings. Demand in Asia is softening, central banks are pivoting toward tighter monetary policy to try and rein in accelerating inflation, and President Biden’s economic agenda saw a setback after Senator Manchin rejected the spending package, Bloomberg reported.
