At market open, oil prices came under heavy selling pressure as news of a new COVID-19 variant, B.1.1.529, shook commodity markets. This morning’s drop is the largest since crude prices hit negative $37/bbl on April 20, 2020, as fears of renewed lockdowns have set in. A decrease in travel and potential lockdowns is weighing on oil prices, just as the U.S., Japan, China, India, South Korea, and the U.K. announced that they would release more supply from their strategic reserves.
The U.S. has not announced any new restrictions. However, a few European countries have already announced that they would be limiting travel from several countries where the virus has been detected. It is too early to tell what implications this new variant will have on global demand, but more information should come to light in the coming days. Further, OPEC+ is meeting next week, and the new variant will likely be a topic of discussion, along with the strategic-reserve release.