What the oil market signals about omicron

[Leroy N. Soetoro]

https://www.foxbusiness.com/markets/what-the-oil-market-signals-about-
omicron

Sometimes the oil market can be a predictor of future events. Could the
rebound in oil signal the beginning of the end of the COVID plague?

Right after Thanksgiving, oil prices crashed on reports of omicron, a new
variant of the COVID-19 virus. Crude oil prices went down on anticipation
and fear that we could see the global economy shut down in an attempt to
stop the spread of this new fast-spreading variant. Energy prices plunged
into bear market territory.


Ticker Security Last Change Change %
USO UNITED STATES OIL FUND L.P. 55.08 +0.41 +0.75%
BNO UNITED STS BRENT OIL FD LP UNIT 21.24 +0.13 +0.62%
Yet now oil prices are surging back as it is clear that omicron will not
shut down the global economy nor will it shut the U.S. economy, where we
are still the world's biggest consumer of oil.

President Biden acknowledged as much, lowering fears of a COVID-19
shutdown, and said Monday, "There is no federal solution. This gets solved
at the state level."

In other words, a lockdown is off the table. Yet what may turn oil around
are reports that people who catch the omicron variant might strengthen
immunity against the earlier delta strain of the virus.

COVID TEST MAKER RAMPS UP PRODUCTION

This could be big news for oil demand. Historians and scientists say that
viruses that cause pandemics often mutate to become less life-threatening.
The devastating 1918 Spanish flu pandemic reportedly ended as more people
became exposed to the virus and the strains became less life-threatening.

Bloomberg News reported. "While omicron has been shown to be highly
transmissible and can evade some antibodies, after two weeks of getting
symptoms immunity to subsequent infections from the strain rose 14-fold,
according to the authors led by Alex Sigal and Khadija Khan of the Durban,
South Africa-based Africa Health Research Institute. A smaller improvement
was found against delta," it continued.

Ticker Security Last Change Change %
XOM EXXON MOBIL CORP. 61.15 -0.54 -0.88%
CVX CHEVRON CORP. 117.95 -0.61 -0.51%
COP CONOCOPHILLIPS 72.92 -0.20 -0.27%
And while it is too early to say that this is the end of the pandemic, it
does suggest that the odds of an extended open global lockdown of
economies is unlikely.

What it also means for oil traders is that the selloff we saw in oil was
way overdone based upon the reality of what has happened. Because oil
producers may have cut back a bit due to lower prices and buyers of oil
slowed their purchases on fears of demand destruction, it could leave us
caught short so the ensuing rally in oil could send prices higher than
would have been if there had been no omicron scare at all.

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