Brent oil slumped as increasing coronavirus cases and a new Covid-19 strain raised concerns about the outlook for energy demand ahead of next week’s Opec+ meeting on production policy.
Futures in London slid toward $80 a barrel as crude was swept up in a wave of caution across global markets. Virus cases are climbing in Europe and the US, while UK authorities will temporarily ban flights from some southern African countries and put travellers in quarantine over worries about the new strain.
“The new Covid variant found in South Africa is ringing fresh alarm bells,” said Vandana Hari, founder of Vanda Insights in Singapore.
“I expect Opec+ to stay the course on its tapering strategy but if the new variant emerges as a major problem in the coming days, it may end up pausing the monthly increments.”
Opec+ meets on December 2 to decide production policy for January following the unprecedented move by the US and other nations to tap strategic stockpiles to tame rising energy prices.
The alliance, which has been restoring 400,000 barrels a day of supply to the market each month, will have to consider internal projections that the reserves release will exacerbate a surplus it’s forecasting for early next year.