Oil prices plunged $10 a barrel on Friday, their largest one-day drop since April 2020, as a new variant of the coronavirus spooked investors and added to concerns that a supply surplus could swell in the first quarter.
Oil prices fell with global equities markets on fears the variant, could dampen economic growth and fuel demand.
The World Health Organization has designated the new variant, which it named Omicron, as “of concern,” according to the South African health minister.
The United States, Canada, Britain, Guatemala and European countries are among those to restrict travel from southern Africa, where the variant was detected.
Brent crude settled down $9.50, or 11.6%, to $72.72 a barrel, a weekly decline of more than 8%.
U.S. West Texas Intermediate (WTI) crude settled down $10.24 on Friday, or 13.1%, at $68.15 a barrel, declining more than 10.4% on the week in high volume trading after Thursday’s Thanksgiving holiday in the United States.
“The market is factoring in a worst-case scenario situation in which this variant causes massive demand destruction,” said Bob Yawger, director of energy futures at Mizuho.
Both contracts fell to the fifth week of losses and their steepest falls in absolute terms since April 2020, when WTI turned negative for the first time amid a coronavirus-induced supply glut.
News of the variant caused ructions in a market previously caught between producer and consumer nations.
“The biggest fear is that it will be resistant to vaccines and be a massive setback for countries that have reaped the benefits from their rollouts,” said Craig Erlam, senior market analyst at OANDA.
OPEC+ is also monitoring developments around the variant, sources said on Friday, with some expressing concern that it may worsen the oil market outlook less than a week before a meeting to set policy.
Scientists have so far only detected the Omicron variant in relatively small numbers, mainly in South Africa but also in Botswana, Hong Kong and Israel, but they are concerned by its high number of mutations which could make it vaccine-resistant and more transmissible.
