Oil up 5% on the day after the 13% plunge on Friday
Oil prices are back up in trading today as the risk trades are bouncing back after having been beaten up quite badly at the end of last week.
Of note, WTI suffered its worst performance of the year in a massive drop below $70 before finding some footing to recover back to around $71.50 levels at the moment.
From a technical perspective, buyers are pushing back against the 200-day moving average (green line) @ $69.81 so that is some minor encouragement.
It is hard to gauge the extent of the oil drop on Friday as the Omicron headlines hit during a period of low liquidity in markets in general (Thanksgiving holiday period).
But as mentioned at the time, there is serious consideration that oil bullishness may be heavily dampened as any optimistic fundamental outlook to next year hinges on the fact that the world will continue to advance in the pandemic recovery.
However, the Omicron variant presents a big threat to that especially if border controls are tightened and tougher restrictions are imposed globally once again.
It will be a case of resetting the oil market outlook back to the early stages of the year as the world will be hoping for another “quick fix” from vaccinations to resolve this latest episode, if we do end up in a worst-case scenario that is.
However, if Omicron proves to be nothing more than a hiccup, Friday’s retreat will be quite the dip to buy in the long-term. But for now, one can’t really rule out a dead cat bounce especially when we still need a few weeks to let the dust settle.