Title: Omicron threatens oil demand recovery, already hit by Europe's rising COVID cases

Nov 29, 2021, 02:51AM ET

By: AnalysisWatch

Asian oil refiners' profit margins have fallen to their lowest level in nearly five months amid fears that the coronavirus variant Omicron could deal another blow to the recovery in oil demand, which has already been hit by rising COVID-19 cases in Europe.

Governments around the world-imposed entry bans on travelers from southern Africa over the weekend in an effort to curb the spread of the Omicron virus, which was first detected in South Africa. Scientists are scrambling to determine whether the pathogen is more transmissible or causes more severe disease than previous variants.

This comes at a time when refinery profit margins in Asia and Europe have already taken a hit in recent weeks, as many European countries have reimposed restrictions on coronavirus imports in an effort to stem the rise of COVID-19 cases.

The double whammy threatens to hurt the global economic recovery and, in turn, oil demand, which the International Energy Agency expects to rise by 5.5 million barrels per day (bpd) to 96.3 million bpd in 2021.

Oil prices plunged more than 10% on Friday-their biggest one-day drop since April 2020-but had recovered only some of those losses by 0:08 GMT Monday and were up more than 3% on the day. Analysts said Friday's selloff was overdone for Brent and WTI crude futures.

Complex margins in Singapore, a barometer of Asian refiners' profitability, were at $2.15 a barrel on Friday, the lowest since June 30, data from Refinitiv showed.

Just a month ago, margins reached $8.45 per barrel, the highest since September 2019.

An analyst at a Beijing-based consultancy said strict border controls could keep Omicron out of the world's largest oil importer, while the price drop could benefit Chinese refiners and consumers.