(Bloomberg) — Oil fell for the first time in three days on concerns about the demand impact from the omicron variant and tighter monetary policy.
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Futures in New York dropped below $72 a barrel after rising 2.3% over the past two sessions. Daily Covid-19 cases in the U.K. have jumped to a record, while hospitalizations have surged across the U.S. The Bank of England unexpectedly raised interest rates for the first time since the pandemic struck in a sign that inflation is now of bigger concern to leading central banks than the virus.
Signs are also emerging of softening oil demand in Asia, while the International Energy Agency said this week that the global market had returned to surplus as omicron impedes travel. The weakness is showing up in the market’s structure, with Brent momentarily flipping into a bearish contango on Tuesday.
This week has seen traders hit with conflicting signals on demand and supply, ranging from the central bank moves and new restrictions to limit the spread of omicron to declining inventories in the U.S. That has seen a generally risk-off attitude in oil markets, leading the aggregate volume of futures contracts on Thursday to drop to its lowest since August.
“There is still much uncertainty stemming from omicron,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore. “Demand may be feeling the hit in different pockets, but does not appear to be as severe as the delta outbreak for now. Price consolidation may continue for a while.”
Omicron is starting to limit the movement of people. The City of London has transformed from a raucous district with thousands of workers celebrating Christmas into a no-party zone in the space of a week. Almost half of staff didn’t go to the office on Monday, the lowest since September, according to data compiled by Google, which tracks the location of its users.
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