Both major oil benchmarks suffered further two per cent drops today, as fears over the Omicron variant spread across the market.
Brent Crude tumbled to $73.52 while WTI Crude is now within a hair’s breadth of dropping below the $70 per barrel threshold after a 2.1 per cent fall.
Earlier this week, The International Energy Agency downgraded its demand expectations for the new year – anticipating global air travel to decline this winter as the new, highly transmissible variant spreads.
This could lead to a massive surplus in the market, weighing down the price of barrels into the New Year.
The Organization of the Petroleum Exporting Countries and its allies – known as OPEC+ – could cut down plans to add 400,000 barrels per day into the market from next year.
The group is meeting on January 4 to review its plans and the market landscape.
Rising Omicron cases and the potential decrease in fuel demand has already caused Gulf stock markets – which are highly dependent on oil prices – to slide in early trading on Sunday.
Saudi Arabia’s benchmark index dropped 0.8 per cent, while the indexes in Abu Dhabi and Dubai fell by 1.4 and 1.9 per cent respectively.
The performance reflects European anxieties over soaring Covid-19 cases, putting a dampener on the festive period.
Prime Minister Boris Johnson is reportedly considering a two-week circuit-breaker set of restrictions with indoor meetings severely reduced and travel restricted.
Meanwhile, Netherlands is set to enter a full-scale lockdown, while Denmark and France are both also considering new, tougher measures this Christmas.
Other European countries such as Italy, Czech Republic and Austria already introduced social distancing measures before the emergence of the new variant – after struggling with Delta cases through the Autumn.
Germany and France have also recently banned non-essential arrivals from the UK.
The UK appears to be the current hotspot for Covid-19 cases, which are being driven by the Omicron variant.
The country has suffered three record days of Covid-19 infections between Wednesday and Friday.
Numbers fell slightly on Saturday, but remain high with 90,418 cases and 125 deaths over the past 24 hours were reported.
There are also 7,611 people in hospital who have tested positive for the virus.
The government estimates 80 per cent of new cases in London are Omicron cases, with SAGE warning of potentially thousands of hospitalisations a day over New Year.
Over 10,000 Omicron cases have now officially been confirmed across the UK, with seven deaths and 85 hospitalisations.
This has led to Mayor of London Sadiq Khan declaring a ‘major incident’ in the capital.
Reports over the lethality of the new variant are mixed, with early findings from South Africa suggesting the variant is 30 per cent milder than the previously dominant Delta strain.
However, Imperial College London’s modelling found no evidence the new strain is milder, and reported that the risk of reinfection from Omicron variant is over five times higher.
Countries are now racing to offer booster jabs to their adult populations, with third doses of the vaccine estimated to offer as much as 80 per cent protection.