A surge in COVID-19 cases and the emergence of the Omicron variant will dent global demand for oil, the International Energy Agency (IEA) said on Tuesday, but the broader picture is one of increasing output set to top demand this month and soar next year.
“The surge in new COVID-19 cases is expected to temporarily slow, but not upend, the recovery in oil demand that is underway,” the Paris-based IEA said in its monthly oil report.
“New containment measures put in place to halt the spread of the virus are likely to have a more muted impact on the economy versus previous COVID waves,” it said.
Oil prices eked out small gains on Tuesday, recouping losses earlier in the day triggered by investor worries about demand after renewed restrictions were imposed in Europe and Asia amid a rise in coronavirus cases.
Brent crude oil futures gained 25 cents, or 0.3%, to $74.64 a barrel by 0732 GMT, while U.S. West Texas Intermediate (WTI) crude futures increased by 19 cents, or 0.3%, to $71.48.
“Energy traders don’t want to bet against OPEC+ but all the short-term risks from Omicron to Fed tightening is proving to be very disruptive to the short-term outlook for oil prices,” said Edward Moya, senior analyst at OANDA.
“The virus spread across Europe is delivering a bigger hit than expected and when you calculate family gatherings for the holidays, the short-term outlook could get slashed over the next month.”