Nov 29 (Reuters) - The Omicron coronavirus variant kicked
oil prices lower late last week and has sapped refining margins,
but with crude futures rallying on Monday, the impact could be
Governments worldwide have imposed curbs on travellers to
try limit the spread of Omicron, first detected in southern
Africa, as scientists race to determine the level of risk.
Oil prices plunged more than 10% on Friday - their largest
daily drop since April 2020 - but recovered some of those losses
on Monday, standing up nearly 5% on the day. Analysts said the
Friday sell-off had been excessive.
Refining margins fell further, increasing the impact of new
coronavirus curbs that had already been rolled out in Europe.
On Friday, European diesel barge refining margins
<ULSD10-B-ARA, BFO> touched a three-month low of about $8 a
barrel, although oil price volatility kept trading liquidity
Jet fuel cargo margins <JET-C-NWE, BFO> were assessed at
about $7.7 a barrel, near a two-and-a-half month low.
"This broad-based correction reflected fears that the
Omicron variant would turn into a major headwind to oil demand,"
bank JP Morgan said, referring to Friday's price move.
But it said it expected demand recovery from the pandemic to
continue even though consumption forecasts had weakened before
last week's sell-off.
The volatility raises the stakes for a meeting by the
Organization of the Petroleum Exporting Countries and allies set
to take place this week when the producer nations will weigh
their concerns about demand with pressure from consumer nations
facing inflationary pressure from still high oil prices.
KY Lin, spokesman at Taiwan's Formosa Petrochemical Corp
told Reuters further price rises could be limited by
investor caution because of Omicron.
Singapore's complex margins, a barometer for Asian refiners'
profitability, stood at $2.36 a barrel on Monday after falling
to the lowest since June 30, Refinitiv data showed.
Just a month ago, margins peaked at $8.45 a barrel, the
highest since September 2019. <DUB-SIN-REF>
An official at a major South Korean refiner who asked not to
be named said he had seen "drastic drops in refining margins"
because of the Omicron variant.
Travel curbs could especially hit the recovery of jet fuel
prices, which reached a 2021 peak of $13.50 a barrel in
mid-October, according to Reuters calculations - broadly in line
with their levels in October 2019.
Air travel, however, is a relatively small part of overall
"Fundamentally, the announced and enacted international air
travel constraints cannot explain such a sharp slump (in crude
prices)," said Norbert Rucker, head of economics at Julius Baer.
"Air travel represents around 5%-7% of global oil demand."
Demand from power generators, which have shifted to using
oil as natural gas supplies has shrunk, is also expected to
support the overall market.
China, the world's biggest fuel consumer, could also
continue to provide support it its rigorous border controls
manage to limit the spread of Omicron, said an analyst from a
Beijing-based consultancy, who declined to be named due to
(Reporting by Florence Tan in Singapore, Heekyong Yang in Seoul
and Noah Browning and Ahmad Ghaddar in London; additional
reporting by Ahmad Ghaddar in London; Editing by Ana Nicolaci da
Costa and Barbara Lewis)