Oil falls nearly 5pc on jitters over vaccine efficacy

By News Desk

LONDON: Oil prices tumbled nearly 5 percent on Tuesday after Moderna's chief cast doubt on the efficacy of COVID-19 vaccines against the Omicron coronavirus variant, spooking financial markets and adding to worries about oil demand.

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.

Brent crude futures fell $2.76, or 3.76 percent, to $70.68 a barrel at 1338 GMT after slipping to an intraday low of $70.22, their lowest since late August.

U.S. West Texas Intermediate (WTI) crude futures fell $2.86, or 4 percent, close to $67 a barrel, after falling to a session low of $66.51.

"The economic impact is driven by fear, and by the policy response... Fear is impacting travel. There are outright bans. But also the fear of being stranded which causes travel plans to alter," Paul Donovan from UBS said in a note.

Oil plunged around 12 percent on Friday along with other markets on fears the heavily mutated Omicron would spark fresh lockdowns and dent global oil demand. It is still unclear how severe the new variant is.

With a weakening demand outlook , expectations are growing that the Organization of the Petroleum Exporting countries, Russia and their allies, together called OPEC+, will put on hold plans to add 400,000 barrels per day (bpd) to supply in January.

Meanwhile, OPEC and the oil cartel´s allies hold a key output meeting on Thursday facing new challenges as the Omicron coronavirus variant has roiled markets.

The OPEC+ alliance has resisted US-led pressure to step up production to bring down surging energy prices, and the emergence of the new variant has complicated the equation.

The meeting "is shaping up to be one of the most significant since the pandemic demand recovery began, and the key signal will be how much more oil will be added to supply to start the new year," said Peter McNally, an analyst at the Third Bridge think tank.

The detection of the new variant on Thursday caused crude prices to plunge more than 10 percent, a first since the massive drops of April 2020.