Oil futures contracts eased on Monday amid fears that rising coronavirus cases around the world could reduce demand for crude oil as new doubts emerged about the effectiveness of vaccines against the Omicron variant.
Brent futures fell 76 cents, or 1.0%, to $ 74.39 a barrel, while US crude West Texas Intermediate (WTI) fell 38 cents, or 0.5%, to $ 71.29.
The Omicron variant, which has been reported in more than 60 countries, poses a "very high" global risk, according to the World Health Organization, and there are indications that it eludes vaccination protection.
The Organization of Petroleum Exporting Countries raised its forecast for global oil demand in the first quarter of 2022, but left its full-year growth forecast unchanged, stating that the Omicron variant will have little impact as the world adapts to dealing with the COVID- 19 pandemic.
Governments around the world, most recently the UK and Norway, tightened restrictions to stop the spread of the Omicron variant.
At least one person died in the UK after contracting Omicron, the first publicly confirmed death from the fast-spreading variant worldwide.
In China, the major manufacturing province of Zhejiang battled its first COVID-19 cluster this year, and hundreds of thousands of citizens are now under quarantine.
"China is the world's largest importer of crude oil, and those barrels could come under pressure pretty quickly if Covid spreads uncontrollably in the world's most populous country," said Bob Yawger, director of energy futures at Mizuho in New York.
OPEC and its allies, a group known as OPEC +, will meet on January 4th to decide on their funding policy.
The Iraqi oil minister said on Sunday that he expected OPEC to maintain its current policy of gradually increasing supply by 400,000 barrels per day (bpd) a month at its next meeting.
The Saudi energy minister said the oil markets could face a dangerous phase as less investment in exploration and drilling threatens to drop crude oil production by 30 million barrels a day by 2030.
In the United States, crude oil production in the Permian Basin, the largest oil shale formation in the United States, is expected to hit a record high in January, according to government data.
In Europe, natural gas prices rose 11% on Monday amid colder forecasts and concerns that Gazprom's (MCX: GAZP) PAO's Nord Stream 2 gas pipeline from Russia to Germany could remain closed if Russia resumes aggression against Ukraine.
This pipeline would help boost gas supplies in Europe, where inventories are extremely low for this time of year.
According to analysts, these higher gas prices should support oil demand and prices as European manufacturers and power generators switch from scarce and expensive gas to oil to run their assets.
Traders will also focus this week on the monetary policy decisions expected by the European Central Bank (ECB), the US Federal Reserve, the Bank of England and the Bank of Japan, possibly including an early termination of the stimulus packages.
