Oil Prices and Stock Markets crash worldwide with the news of a new COVID-19 variant Omicron on Friday, November 26th, 2021.
Oil Prices Fall
Oil prices experienced one of their worst trading days in recent memory on Friday, November 26th, 2021, plunging across the board by over 10% on fears that a new Chinese Virus COVID-19 variant discovered in Southern Africa, named Omicron, might dampen economic growth and trigger another demand slump. Following the spectacular failure of the SPR release, which instead of depressing prices ratcheted them up higher, renewed COVID-19 concerns have now brought about President Biden’s objective. OPEC+ might still have a say in this, with the group’s December 02 meeting potentially resulting in a reduction in production targets for 2022.
President Joe Biden on Monday 23-November 2021 ordered the release of 50 million barrels of oil from America’s Strategic Petroleum Reserve (SPR) in coordination with smaller releases from Britain, China, India, South Korea and Japan, to try to cool prices after OPEC+ ignored calls to pump more. Biden, facing low approval ratings ahead of next year’s congressional elections, was frustrated after OPEC+ shrugged off his repeated requests to pump more oil. US President’s order came in order to help reduce energy costs under pressure from millions of Americans embarking on Thanksgiving travel. U.S. gasoline prices are up more than 60% in the last year, the fastest rate of increase since 2000.
Readers can read the statement issued by White House here :-
President Biden Announces Release from the Strategic Petroleum Reserve As Part of Ongoing Efforts to Lower Prices and Address Lack of Supply Around the World
Goldman Sachs estimated the total size of the release at 70 million-80 million barrels, less than one day’s worth of global consumption, describing it as a “a drop in the ocean”.
Oil prices also declined on fears the new Chinese Corona Virus strain could lead to restrictions and dampen demand. Brent crude extended earlier declines to fall by 5.86% to $77.43 a barrel by early afternoon.
“The drop in the oil price is the market’s way of saying it is worried about a reduction in economic activity,” said Russ Mould, investment director at AJ Bell.
In London, shares in oil giant BP dropped by 6.2%% while rival Shell also saw its share price fall by more than 4.6%.
But Mr Mould added: “The flipside of falling commodity prices is that a weaker oil price should provide some relief in terms of inflationary pressures.
“That may cause central banks to be more cautious towards raising rates in the near-term, however it does depend on whether the new Covid strain causes significant disruption or can be contained as best as possible in a rapid manner.”
China Remains Non-Committal on SPR Release. Despite repeated talks with the US government, China has pushed back against President Biden’s calls to “do more” and stated it would coordinate its own releases of strategic stocks according to its needs, cooling down the enthusiasm of market bears.
OPEC Panel Finds US SPR Release Superficial. OPEC’s Economic Commission Board estimates that the SPR releases carried out by the United States and its partners will only inflate the global crude surplus over Q1 2022, potentially paving the way for a slower-than-assumed OPEC+ production rollout coming up. However this news of the new Chinese Virus variant Omicron brought the Oil prices down on the fear of renewed lockdowns in some countries that may bring down the demand for Oil as during the beginning of the Pandemic days.
Related Article Global Energy Crisis : Prices Of Gasoline/Petrol Surge Worldwide
Stock Markets Fall
Stock markets across the world have fallen sharply after the discovery of a new Chinese Corona Virus COVID-19 variant raised fears over the economic recovery.
The FTSE 100 index of leading UK shares closed 3.7% down, while main markets in Germany, France and the US also sank.
Shares in airlines and travel firms were hit hard, with BA-owner IAG and Wizz Air down 15%. Tui shed 10%.
The FTSE 100 index suffered its biggest one day drop in more than a year. Shares of major UK lenders HSBC, Lloyds Bank, NatWest and Barclays all fell about 7% as investors scaled back expectations of a Bank of England interest rate rise in December.
The biggest FTSE 100 riser was food delivery firm Ocado, up 4.5%, on anticipation that online firms could be a beneficiary if tighter restrictions are reintroduced.
Cruise operator Carnival suffered a 15% slide, making it the biggest faller on the FTSE 250, while EasyJet tumbled 11.5%.
Neil Wilson, chief market analyst at Markets.com said investors fear a new Covid variant “will lead to fresh lockdowns, mobility restrictions and lower economic growth”.
On Wall Street, the Dow Jones index slumped 2.8% in its shortened trading day following Thursday’s Thanksgiving holiday.
“It’s Black Friday today for the retailers, but it’s ‘Red Friday’ right now for the stock market,” said Patrick O’Hare at Briefing.com.
Concern the new variant could slow global economic growth sent oil prices sharply lower. US WTI crude tumbled 11.3% to $69.53 per barrel, while European benchmark Brent retreated 10.2% to $73.81. The price of gold, a haven for investors in troubled times, rose.
Despite the fall in the FTSE 100, the index is still trading nearly 12% higher than it was a year ago.
European stocks plunged 2.7%, on track for their worst day since September 2020, with travel and leisure stocks particularly badly hit.
Germany’s DAX sank 3%.
Overnight stock markets in Japan, Hong Kong and Australia also fell as did indexes in India and South Korea.
In India, Nifty50 plunged more than 500 points to hit the day’s low of 16,985.70 and closed 2.9 percent lower at 17,026.45 points. The BSE Sensex crashed about 1,800 points from the previous close to hit a day’s low of 56,993.89 points, and closed 2.8 percent lower at 57,107.15 points.
Both Germany and France’s leading stock market indexes fell by more than 3% on Friday.
MSCI’s index of Asian shares outside Japan fell 2.2%, its sharpest drop since August.
Japan’s Nikkei skidded 2.5% and S&P 500 futures were last down 1.8%.
UK Response to new variant of Chinese Corona Virus named Omicron
The UK and other nations have introduced a ban on flights from six southern African countries.
UK Health Secretary Sajid Javid said scientists were “deeply concerned” about the new Covid strain and its potential to evade immunity.
The UK has temporarily banned flights from South Africa, Namibia, Zimbabwe, Botswana, Lesotho and Eswatini starting from midday on Friday until 04:00 on Sunday.
All six counties are being added to the UK’s travel red list. It means that any British or Irish resident arriving from the countries after 04:00 on Sunday will have to quarantine in a hotel, with those returning before that being asked to isolate at home.
Mr Javid said more needed to be learned about the new Covid variant. Only 59 confirmed cases have been identified in South Africa, Hong Kong and Botswana so far.
However, he said the variant had a significant number of mutations, “perhaps double the number of mutations that we have seen in the Delta variant”.
He said that adding the six countries to the red list was about “being cautious and taking action and trying to protect, as best we can, our borders”.
BA said: “We’ll be contacting affected customers with information about their flight.”
It added it was advising passengers to monitor the latest travel advice with the UK government and on the BA website.
Virgin Atlantic said its flights from Johannesburg to London Heathrow would be cancelled between midday on Friday to early on Sunday morning.
“We’re currently reviewing our schedule of South Africa operations for the coming week,” it added.
The carrier said any customers booked to travel to or from South Africa with Virgin Atlantic should check on the company’s website. If they have booked through third parties or agents, they should get in touch with them.
EU Response to new variant of Chinese Corona Virus named Omicron
A number of other countries – such as Germany, Italy and Israel – have banned flights from the six southern African nations.
European Commission president Ursula von der Leyen tweeted that other EU nations should also “activate the emergency brake” to stop travel from these countries.
US Response to new variant of Chinese Corona Virus named Omicron
The US will restrict travel from South Africa and seven other southern African countries to try to contain a new coronavirus variant spreading there.
From Monday, only US citizens and residents will be allowed to travel from the region.
This follows a similar flight ban imposed by the EU and the UK. Canada is also introducing travel restrictions.
US officials said flights from South Africa, Botswana, Zimbabwe, Namibia, Lesotho, Eswatini, Mozambique and Malawi will be blocked, mirroring earlier moves taken by the EU. The ban will come into effect on Monday.
In a statement, President Joe Biden called the move a “precautionary measure” taken until more is known about the variant.
Canadian Response to new variant of Chinese Corona Virus named Omicron
Canada is also shutting its borders to foreign travellers who have recently been to South Africa, Namibia, Lesotho, Botswana, Eswatini, Zimbabwe and Mozambique. Foreign citizens will be banned from Canada if they have been to the seven nations in the past 14 days.
The Omicron variant was first reported to the WHO from South Africa on 24 November, and has since been identified in other countries.
The bans already appear to be causing confusion at a number of airports. Passengers on a plane travelling from Cape Town to Manchester via Amsterdam were held on the tarmac at Schiphol Airport in the Dutch capital for four hours, before eventually disembarking to take PCR tests.
Meanwhile, the flight bans threaten to separate families over the festive season.
Other Countries Response
The Indian government has asked states to conduct rigorous screening and testing of all international travellers coming from and transiting through Botswana, South Africa and Hong Kong.
South Africa criticized the new travel restrictions as “unjustified”
South Africa’s health ministry has criticized the rush to impose new travel restrictions, calling them “draconian”, and contrary to WHO guidance. South African Health Minister Joe Phaahla told reporters that the flight bans against the country were “unjustified”.
The World Health Organization (WHO) earlier declared the new variant to be “of concern”, naming it Omicron.
Scientists say they still have much to learn about the virus’s new mutations, and the WHO has said it will take a few weeks to understand the impact of the new variant, as experts work to determine how transmissible it is.
The WHO on Friday said preliminary evidence suggested the new variant carried a higher risk of reinfection than other variants.
Scientists have said it is the most heavily mutated version yet, which means Covid vaccines, which were designed using the original strain from Wuhan, China, may not be as effective.
The WHO says so far fewer than 100 sample sequences have been reported. Cases have mainly been confirmed in South Africa, but have also been detected in Hong Kong, Israel, Botswana and Belgium.
Most of the cases in South Africa have been from its most populated province, Gauteng, of which Johannesburg is the capital city.
Only about 24% of South Africa’s population is fully vaccinated, which could spur a rapid spread of cases there
Points to Ponder
The Cartel of OPEC nations was not going to increase the Oil Production and was spreading the disinformation based on assumptions and presumptions that there is going to be a global supply surplus in the first quarter. Then there was a coordinated release of crude reserves among major consumers, led by the US. If it was not this news of the new Chinese Corona Virus variant Omicron, consumers worldwide would have been burdened by the greed of the cartel of OPEC nations and forced to pay higher prices for gasoline/petrol. Question is to be asked, why is the whole world held hostage by the cartel of a few OPEC nations? Isn’t there a way to control the prices so that the poor nations can also afford them?
Is the lockdown due to Chinese Corona virus the only way to bring down the demand for oil driving the OPEC to also reduce the oil prices?
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