DUBAI: Oil prices gave up gains on Tuesday, falling more than 2 percent along with broader financial markets, after a media report cast doubt on the efficacy of COVID-19 vaccines against the omicron coronavirus variant.
The head of drugmaker Moderna told the Financial Times that COVID-19 vaccines are unlikely to be as effective against the omicron variant of the coronavirus as they have been against the Delta variant.
Both benchmarks tumbled more than $1 on the news. Brent crude futures fell $1.82, or 2.5 percent, to $71.62 a barrel at 0605 GMT, US West Texas Intermediate crude futures dropped $1.61, or 2.3 percent, to $68.34 a barrel.
Oil plunged more than 12 percent on Friday along with other markets on fears the heavily mutated omicron would spark fresh lockdowns and dent global growth, hurting oil demand.
Amid speculations on the impact of omicron on oil demand, the Saudi energy minister said it was too early to tell, adding OPEC+ was keen to monitor the situation.
The group of oil-producing countries has rescheduled its meetings to later this week to have more time in assessing the impact, Prince Abdulaziz bin Salman, told Arab News in an Aramco ceremony in Dhahran on Monday.
Earlier, Russian Deputy Prime Minister Alexander Novak said, there is “no need for emergency measures in the oil market.”
He added OPEC+ partners did not call to review the current deal.
Oil prices rebounded on Monday after a huge slump last week, which was led by fears brought by the new coronavirus variant.
Brent crude futures climbed $3.11, or 4.3 percent, to $75.83 a barrel by 0355 GMT, after falling $9.50 on Friday.
U.S. West Texas Intermediate (WTI) crude was up $3.47, or 5.1 percent, at $71.62 a barrel, having tumbled $10.24 in the previous session.
Oil prices plunged more than 10 percent on Friday, their biggest one-day drop since April 2020, as the new variant spooked investors across financial markets.
There are worries the new variant could derail the global economic recovery, potentially hurting oil demand, while it has also added to concerns that a supply surplus could swell in the first quarter.
Economists at Goldman Sachs outlined four scenarios that could happen as the world cautiously navigates the situation.
If omicron turns out to transmit faster than its predecessor, Delta, it will result in first-quarter global growth slowing to a 2 percent quarter-on-quarter annual rate.
The economists said if both the disease severity and immunity against hospitalizations are worse than for Delta, global economic growth will take a more substantial hit, but inflation impact will be “ambitious.”
On a slightly positive note, if omicron spreads slower than delta, it will have no significant effect on global growth and inflation, Goldman Sachs said.
If the new variant is more transmissible, but causes less severe disease, global growth could be higher than Goldman’s baseline.
Most Gulf stock markets ended lower on Sunday, with the Saudi and Dubai indexes suffering their biggest single-day fall in nearly two years as fears of a potentially vaccine-resistant coronavirus variant spooked investors.
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The World Health Organization on Friday designated the omicron coronavirus variant detected in South Africa as being “of concern” — the fifth variant to be given that designation
Saudi Arabia’s benchmark index slid 4.5 percent, dragged down by a 5.4 percent fall for Al Rajhi Bank and a 6.2 percent decline for Saudi Basic Industries.
The Kingdom halted flights from and to Malawi, Zambia, Madagascar, Angola, Seychelles, Mauritius and the Comoros Islands on Sunday owing to concerns related to the spread of the new COVID-19 strain, state news agency SPA reported on Twitter.
The latest pandemic developments also sent oil prices, a key catalyst for the Gulf’s financial markets, plunging by $10 a barrel on Friday for their largest one-day drop since April 2020. The new variant added to concerns that an oil supply surplus could swell in the first quarter.
“It’s obvious that traders are concerned about the implications of the newly mutated virus which brings back the lock-down memories from last year. If Saudi decides to impose more restrictive measures the economy will be impacted significantly and the growth prospects next year will vanish”, Mohammed Al-Suwayed, chief executive officer of Razeen Capital, said. He said the time is now suitable for investors to reinvest in the market since the share prices are relatively low.
Dubai’s main share index declined 5.2 percent, its biggest intraday fall since March 2020, with most stocks in negative territory.
Blue-chip developer Emaar Properties plunged 9.4 percent and budget carrier Air Arabia retreated by 7.1 percent.
In Abu Dhabi, the index fell 1.8 percent, weighed down by a 3.3 percent drop for telecoms company Etisalat and a 1.4 percent decline for First Abu Dhabi Bank, the country’s largest lender.
The UAE has suspended entry for travelers from South Africa, Namibia, Lesotho, Eswatini, Zimbabwe, Botswana and Mozambique from Nov. 29 over concerns about the new coronavirus variant, the state news agency reported on Friday.
In Qatar, the index slipped by 2.8 percent as investors shunned stocks across board, with petrochemicals group Industries Qatar leading the losses.
Egypt’s blue-chip index lost 1.3 percent, with top lender Commercial International Bank retreating by 0.8 percent.