(Bloomberg) – Oil’s first drop in three days deepened as traders worried more about the impact on demand of the omicron variant and tighter monetary policy.

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New York futures fell 3.4% on Friday, trading below $ 71 a barrel. Daily cases of Covid-19 in the UK have reached a record high, while hospitalizations have increased in the US. Prices also weakened over fears that measures by the Federal Reserve and other central banks to control inflation could hamper economic growth.

“We need to be prepared for the Covid headlines to continue to lead the oil market on a daily basis at least until the rest of this winter,” said Pavel Molchanov, analyst at Raymond James & Associates Inc. “At this time, The Covid is the number one variable in daily demand. ”

Signs are also emerging of a slowdown in oil demand in Asia, as the International Energy Agency said this week that the global market has returned to surplus as the omicron hinders travel. Weakness is showing in the structure of the market, with Brent entering and exiting a bearish contango, signaling oversupply.

“Crude oil is struggling over concerns over the rapidly spreading omicron virus and its impact on global demand,” said Ole Sloth Hansen, head of commodities research at Saxo Bank A / S in Copenhagen. “In addition, the unusual warm weather in Asia is potentially slowing demand for fuel for heating and power generation.”

The seventh round of Iranian nuclear negotiations was rejected in Vienna after a joint committee meeting and will resume shortly, signaling a greater prospect of Iranian barrels returning to the market. European Union envoy Enrique Mora said the parties had restored common ground for negotiations, but had weeks, not months, to relaunch the 2015 Iran deal.

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This week traders have faced mixed signals on supply and demand. These range from central bank moves to new restrictions aimed at limiting the spread of omicron and declining stocks in the United States. sessions.

Omicron is starting to restrict the movement of people in some parts of the world. The City of London area has gone from a noisy hub with thousands of workers celebrating Christmas to a no-party zone within a week. Nearly half of the staff did not make it to the office on Monday, the lowest since September, according to data compiled by Google, which tracks the whereabouts of its users.

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