Article Hero

Omicron variant causes oil price to crash

1640079298.png
Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
Oil price plunges as Omicron continue to hurt the fuel demand; the worsening of the pandemic took it to a low of $66.12, falling more than 5%

The markets began the week with a strong blow due to the huge Omicron variant infections globally, causing some governments to take restrictive measures both in mobility and in business.

 

The impact of all these decisions on the economy will be significant, and growth expectations are becoming increasingly pessimistic. This week, on Wednesday, the U.S GDP for the 3rd quarter will be published with an average forecast of 2.1%, a level already low that it could surprise the markets with an even greater decline that would further affect negative market sentiment.

In addition to the high infection numbers, another factor contributed to the fall of the North American indices. Manchin, the Democratic representative rejected Biden's fiscal plan of $1.75 trillion that, at first, was taken for granted but needed the approval of every one of the r Congress representatives.

This brought big disappointment sentiments to the market, which makes this huge fiscal plan to be as a significant stimulus for the economy, especially after the Federal Reserve has already begun to withdraw monetary stimulus and prepare to raise interest rates as early as the end of the first quarter of next year.

Another important figure will be published this week: the personal consumption expenditure, the indicator preferred by the Fed to gauge inflation. This figure could further influence the main concern of the North American central bank. The massive price levels increase, and if they remain at the high levels that they have been showing recently, the Fed will be pressured to initiate interest rate increases sooner rather than later.

One of the most affected assets was oil, which experienced a roller-coaster session. The potential fall in global oil demand due to the worsening of the pandemic took it to a low of $66.12, falling more than 5% on the day, although at the end of the session, it recovered part of the lost ground. The reference level that would act as main support is located in the area around $61.40.

 

GráficoDescripción generada automáticamente

DowJones 30 fell in line with the other two U.S indices. Technically it touched the 200-day moving average from where it bounced during the session, a level that acts as support and can be considered as a reference below which the bearish momentum would intensify.

GráficoDescripción generada automáticamente

 

Sources: Bloomberg, Reuters

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided. 

Share this article

How did you find this article?

Awful
Ok
Great
Awesome

Read More

Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.