To be sure, oil isn’t out of the woods yet. After the omicron variant was first identified in late November, oil plunged into a bear market, with benchmark prices dropping around $10 in a single day. Commercial flying overall remains lower than 2019 levels, and new curbs are going into place from France to China as the virus spreads.
“The critical thing is going to be how much more travel restrictions are we going to get in the next couple of weeks,” Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. said in a Bloomberg TV interview. “There’s lots of pent up demand.”
On a global basis, airline seat capacity has barely budged recently. In the week through Dec. 6, it had dropped only 0.5% versus the previous seven days, according to air-travel intelligence firm OAG. In South Africa, omicron’s epicenter, stubbornly-low flight bookings haven’t taken a further hit, and road use has remained steady.
For now, major restrictions remain limited to a handful of countries that don’t consume much oil. Austria went into lockdown before the latest strain was identified, and Vienna traffic levels have slumped to the lowest since August, according to data from TomTom Plc. In Salzburg, recent figures were the lowest since January.
South Africa consumed about 550,000 barrels a day in petroleum products before the onset of the pandemic, according to U.S. Energy Information Administration figures. Austria consumed about 280,000 barrels a day. By way of comparison the U.S. churned through about 20 million barrels a day of oil liquids during the week ended Nov. 26, the latest data show.
Omicron emerged just as the world was getting back to 100 million daily barrels of oil consumption. Vitol Group, Mercuria Energy Group Ltd. and BP Plc, some of the biggest traders, all said demand was at or close to the levels it hit before the pandemic.
While part of the driver behind those calls was a surge in heating and power demand, global mobility has remained strong. Traffic in Beijing remains at similar levels to last year, according to Baidu data. In Western European capitals, it has been above pre-Covid levels for 12 consecutive weeks, Bloomberg calculations show.
That stands in stark contrast to a global oil market that for much of the last month has been fearing the worst. With Brent crude falling as much as 24% from its high for the year, Goldman Sachs Group Inc. said the market was pricing not a single plane flying in the sky for three months. And Citigroup Inc. has noted the impact of each Covid wave is diminishing.
“The market has priced in a demand drop of over 4 million barrels a day due to the latest wave of infections,” Citi analysts including Ed Morse wrote in a research note. “It is too early to make any solid forecast on the impact of the omicron strain, but we note that each new wave of infections impacted global oil demand by half the previous wave.”