The market looks to the OPEC meeting after the emergence of the Omicron variant

December 02, 2021 14:00

As we have been observing for several months, one of the main concerns and catalysts in the financial markets has been the fear of an increase in inflation generated by the sharp increase in energy costs that we have been observing in both oil and Natural Gas. These sharp increases caused a sharp rebound in inflation which has led agencies such as the Federal Reserve and the European Central Bank to take measures towards reducing their stimulus programs, among other things, to deal with the strong inflation that has reached levels not seen in the last 30 years. 

The fear of high prices in fossil fuels before the arrival of winter in the northern hemisphere caused both the United States and China to unite in asking OPEC to take measures such as a greater increase in production to alleviate prices, but also to decide to release part of their strategic oil reserves to counter the sharp rise in the price of crude oil

But in recent sessions, this has changed radically after the fear of the new variant of the coronavirus emerged in South Africa known as Omicron flooded the financial markets causing a 15.37% drop in the barrel of Brent

Therefore, the attention of the markets during today's session will undoubtedly focus on the meeting held by the Organization of the Petroleum Exporting Countries (OPEC) since, during this meeting, they could decide between whether to continue with the current pumping plan, or to stop it by freezing the increase in barrels per day established in the previous meetings in an attempt to recover oil prices. 

Meanwhile, if we look at the daily chart, we can see that after setting annual highs last October, the price of a barrel of Brent has experienced a sharp decline of 18.71%, although it is true that much of this fall has occurred during the last week. 

This sharp decline has led the price to break several important support levels such as the lower band of the bullish channel that had been following since April 2020, and its important average of 200 sessions in the red reaching lows during the session of last Tuesday, November 30, around $ 68.10 per barrel. 

Technically speaking, the downward break of these important support levels opens the doors to a greater correction in search of the double bottom formed between the months of May and August of this year represented by the lower red stripe, although we must be very attentive to the evolution of the price during the next sessions given that we could find a strong rebound if it is finally confirmed that this new variant of Covid-19 could not be as severe as some voices point out. At the moment, uncertainty remains anchored in the markets so we can expect high volatility during the coming sessions

Source: Daily Brent Chart from Admirals' MetaTrader 5 platform. Data range: from October 20, 2020, to December 2, 2021. Prepared on December 2, 2021, at 09:35 hours CEST. Please note that past performance does not guarantee future returns. 

Price evolution in the last 5 years 

  • 2020: -21,52% 
  • 2019: 22,68% 
  • 2018: -19,55% 
  • 2017: 17,69% 
  • 2016: 52,41% 

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Roberto Rojas
Roberto Rojas Financial Analyst, Admirals Spain

Roberto is a Financial Analyst with a European Financial Advisor certificate and a Double Degree in Business Administration and in Actuarial and Financial Sciences. In 2013 was graduated as an Expert Manager in Equities