WTI hovers around $71.00 as investors assess Omicron’s impact

• US crude oil prices fall 1.20%, as the first omicron-related death looms the impact of the new COVID-19 strain.
• Crude oil demand might decrease if the Omicron variant causes severe illness than the first ones.
• WTI Technical outlook: Has an upward bias, but the 200-DMA is at risk.

The US crude oil benchmark, Western Texas Intermediate (WTI), edges lower during the New York session, trading at $70.96 at the time of writing. Since the mid-European session, the market mood has been in risk-off mode. The increase in COVID-19 cases, linked to the newly discovered omicron variant, and the first death caused by the strain in the UK, kept investors nervous. Alongside that, the impact on people’s mobility and the UK’s weighing on imposing stricter restrictions pushed crude oil prices down.

In the overnight session, WTI’s peaked at around $72.75, then tumbled towards $70.50 amid the impact of the omicron variant and mobility restrictions that could decrease oil demand. That, alongside technical resistance levels with the 100-hour simple moving average (SMA) at $71.70 and the 50-hour SMA at $71.36, put a lid on WTI’s prices.

Furthermore, the Organization of Petroleum Exporting Countries and its allies (OPEC+) increased its outlook for oil consumption in the Q1 of 2022, up to 1.1 million barrels a day, equivalent to an annual world consumption growth in a “typical” year before the pandemic, according to Bloomberg.

On its 2022 outlook, OPEC mentioned that the Omicron variant is expected to have a mild impact as the world gets used to dealing with the COVID-19 pandemic.

WTI Price Forecast: Technical outlook

WTI’s daily chart shows that oil had been in consolidation since Tuesday last week. WTI has an upward bias, with the 200-DMA below the price, acting as a dynamic support area. However, downside risks remain unless oil bulls reclaim the 100-DMA at $73.77.

To the upside, the first resistance level would be the psychological $72.00 figure. A breach of the latter would send US crude oil towards the 100-DMA but need to break above $73.00.

On the other hand, a break below the 200-DMA would expose the figure at $70.00. If WTI bears break that level, the following demand area would be the September 1 low at $67.01, followed by the December 2 cycle low at $62.34.