Oil was down Friday morning in Asia. Investors locked in profits from the week’s rally that was driven by growing confidence that the rapid spread of the omicron COVID-19 variant will not impact the global economic recovery and fuel demand.
Brent oil futures rose 3.46% to $28.09 by 11:23 PM ET (4:23 AM GMT) and WTI futures jumped 3.92% to $24.95. Both Brent and WTI futures were set to climb more than 6% this week, even after the profit-taking, their first weekly gain in seven weeks.
The black liquid recovered around half of the losses it has suffered since omicron’s discovery in late November 2021.
“Fears surrounding omicron have somewhat receded but the broad declines overnight show it’s not truly over,” Oversea-Chinese Banking Corp. economist Howie Lee told Bloomberg.
“For now, we see Brent trading between $70 to $75, but if omicron proves less of a threat than initially expected, then I see Brent returning back above $80 in 2022.”
Additionally, headlines about a Japanese study showing that omicron is more than four times as transmissible as the delta variant also sparked some selling, said OANDA analyst Jeffrey Halley.
"Oil's had a massive run, it was an excuse for some of the short-term money to lock in some profits," Halley added.
Sellers also came in overnight after China Evergrande Group (HK:3333) and Kaisa Group Holdings Ltd. (HK:1638) officially defaulted on their dollar debt, prompting Fitch Ratings to cut both developers to “restricted default”
The downgrade increased fears of a potential slowdown in China's property sector, as well as the broader economy, for the world’s top oil importer.