COVID-19 resurgence: Crude oil spot prices decline by 2.1% in November

…As stakeholders, experts charge FG to pursue diversification to avert harshest economic impact

Abimbola Abatta, Uthman Salami and Ogaga Ariemu

Amid growing concerns over the Omicron variant of COVID-19, the Organisation of the Petroleum Exporting Countries (OPEC) has said crude oil spot prices plummeted by 2.1 per cent in November 2021.

In its Oil Market Report for December 2021, OPEC disclosed that the prices dropped by $1.74 to average $80.37 per barrel.

OPEC, however, revealed that the impact of the Omicron variant is expected to be mild and short-lived, as the world becomes better equipped to manage COVID-19 and its related challenges.

While noting that world oil demand was unchanged compared to last month’s assessment, the report said the demand was adjusted higher in first half of 2021 better-than-anticipated transportation fuel consumption in Organisation for Economic Cooperation and Development (OECD).

According to the report, “Crude oil spot prices declined in November, amid concerns regarding the emergence of the new Omicron COVID-19 variant, and easing of the energy crunch which had resulted in higher oil demand from the gas-to-oil switching.

“The OPEC Reference Basket (ORB) value dropped by $1.74, or 2.1 per cent, in November to average $80.37/b, amid lower prices of almost all medium and heavy sour grades in Asia, Europe, and the Americas.

“The year-to-date (y-t-d) ORB value reached $69.45/b, which is $28.71, or 70.4 per cent, higher compared with the same period last year of $40.75/b.”

The report further said, “Dubai Mercantile Exchange Oman crude oil futures prices fell by $2.11 m-om, or 2.6 per cent, to settle at $79.70/b in November.

“The spread between the ICE Brent and NYMEX WTI benchmarks narrowed further in November by 33¢ to average $2.20/b.

“Hedge funds and other money managers accelerated selling in November, contributing to the decline in oil prices.

“Combined speculative net length positions linked to ICE Brent and NYMEX WTI dropped to the lowest level since November 2020

“The backwardation structure in all three markets weakened considerably in the second half of November.

“The fourth quarter 2021 oil demand was adjusted slightly lower, mainly to account for COVID-19 containment measures in Europe and the potential impact of the new Omicron COVID-19 variant.

“The forecast for 2022 is also kept unchanged at 4.2 mb/d.

“Indeed, some of the recovery previously expected in fourth quarter of 2021 is now shifted to first quarter of 2022, followed by a more steady recovery throughout second half of 2022.

“The impact of the new Omicron variant is expected to be mild and short-lived, as the world becomes better equipped to manage COVID-19 and its related challenges.

“This is in addition to a steady economic outlook in both the advanced and emerging economies.”