Oil edges lower as investors try to assess Omicron's full impact

Oil prices edged lower on Wednesday, reversing gains from earlier the week, as investors tried to assess the full impact of the Omicron coronavirus variant on global fuel demand and the effectiveness of existing vaccines.

Brent crude futures dropped 25 cents, or 0.3 per cent, to $75.19 a barrel at 0659 IST, after settling 3.2 per cent higher on Tuesday. US West Texas Intermediate crude was at $71.86 a barrel, down 19 cents, or 0.3 per cent, having gained 3.7 per cent in the previous session.

Oil prices rebounded earlier this week from a collapse last week on rising optimism that the new Omicron variant will not cause major economic damage.

"After having been oversold last week on fears about the Omicron's impact, there has been a correction this week on signs the Omicron may be mild," said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

"But investors are still not fully optimistic and are taking a wait-and-see approach until they learn about Omicron's full impact," he said.

The Omicron variant of the coronavirus can partially evade the protection from two doses of Pfizer and partner BioNTech's Covid-19 vaccine, the research head of a laboratory at the Africa Health Research Institute in South Africa said on Tuesday.

British drugmaker GSK, meanwhile, said on Tuesday its antibody-based Covid-19 therapy with US partner Vir Biotechnology is effective against all mutations of the Omicron variant.

Investors' eyes are also on Iran nuclear talks, tensions between Russia and Ukraine and weather in northern-hemisphere winter, Kikukawa said.

Indirect talks between Washington and Tehran on reinstating their nuclear pact resumed a week ago but broke off on Friday, with a resumption scheduled for later this week, as Western officials voiced dismay at sweeping Iranian demands.

Germany wants Iran to present realistic proposals in talks over its nuclear programme, a Foreign Ministry spokeswoman said on Monday.

Meanwhile, US officials have told members of Congress they have an understanding with Germany about shutting down the Nord Stream 2 natural gas pipeline if Russia invades Ukraine, a senior congressional aide told Reuters on Tuesday.

Investors reacted little to the US weekly inventory data.

US crude stocks fell last week while gasoline and distillate inventories rose, according to market sources citing American Petroleum Institute figures on Tuesday.

Analysts polled by Reuters forecast US crude inventory data would show a second straight weekly decline.

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