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Argus Media Limited

11/26/2021 | News release | Distributed by Public on 11/26/2021 10:34

Brent, WTI down more than 10pc on new Covid-19 variant

Updates throughout

Global crude prices fell by more than 10pc today and shares in oil-exposed companies dropped sharply, as the emergence of a new Covid-19 variant prompted renewed fears about demand.

The Ice front-month Brent contract was down by around $8.50/bl at $73.88/bl as of 16:00 GMT, putting it on course to close at the lowest in more than two months. That price is down by around 14pc from the three-year highs of a month ago, and today's drop will have implications for the Opec+ group's deliberations next week on output policy in the early part of next year.

The front-month Nymex light sweet crude contract was down by more than 11pc, below $70/bl for the first time since September.

The new B.1.1.529 coronavirus variant has prompted the governments of the UK, Singapore, Brazil and other countries to ban flights from today from various southern African nations, including South Africa, Botswana, Namibia, Zimbabwe, Eswatini, Mozambique and Lesotho. European Commission president Ursula von der Leyen said today that EU member states should stop all air travel to and from southern Africa.

The UK government said the new variant has a number of "potentially biologically significant mutations that may change the behaviour of the virus with regards to vaccines, treatments and transmissibility", and that more investigation is required.

The reintroduction of travel bans raises the prospect of a slowing in the recent recovery in air travel, and this hit European airline shares hard today. IAG shares fell by 14pc and Lufthansa and Air-France-KLM by by 11pc, Easyjet by 12pc, and Ryanair by around 10pc.

Shares in Europe's large oil companies also took a hit. BP, Shell, TotalEnergies, Spain's Repsol and Italy's Eni were all down by more than 5pc as of 16:00 GMT.

Opec+ meets next week, when it will set output policy for January. It will have to contend with the latest Covid-19 variant and the co-ordinated release this week of strategic reserves in some of the world's major consuming countries. Earlier this week, before the new variant was detected, several Opec+ delegates told Argus they saw no need for the group to deviate from its plan to gradually restore the production it removed from the market last year in monthly 400,000 b/d increments. But the deal does allow for the possibility of a three-month pause if market conditions warrant it.

By Gavin Attridge, Reena Nathan and Ben Winkley