Oil’s Black Friday: Algos, options turn a tumble into a crash
BNN Bloomberg
Black Friday turned red very quickly for global oil markets.
Black Friday turned red very quickly for global oil markets.
The day after Thanksgiving has been choppy before -- fewer traders can mean more volatility -- but nothing like this year. The prospect of the freshly named Omicron variant of COVID derailing the world’s fight against the pandemic saw an early morning sell-off become a full-blown crash.
At the end, investors were rushing to cover short positions, analysts were ripping up forecasts and next week’s OPEC+ meeting was up in the air. West Texas Intermediate oil, the U.S. benchmark, closed 13 per cent lower, the biggest decline since April 2020. Brent crude slumped 12 per cent.
Oil had climbed fairly steadily through the year, staging a comeback as economic life gradually recovered from the pandemic, putting drivers back in cars and passengers into planes. Many analysts have global demand close to pre-pandemic levels above 100 million barrels a day. With OPEC+ keeping a tight grip on supply, several senior traders said US$100 oil could be close.
But news of a fresh COVID-19 variant, which scientists fear could be more transmissible and less susceptible to vaccines than existing strains, sent familiar shivers through the market. Benchmark crude futures posted the biggest single-day plunge since the early days of the pandemic, showing just how fragile this recovery is.
“It’s been a crazy day in the markets that feels very reminiscent of last March,” said Craig Erlam, senior market analyst at Oanda Europe.
