What is this B.1.1.529 virus variant and why did crude react so sharply negative to this virus variant?

On Friday, the market panic was all about the latest variant of the COVID variant called the B.1.1.529 or the mutating virus. Let us understand what exactly is this B.1.1.529 variant? While the WHO is yet to confirm technical details, what has emerged is that it is a mutating strain of the virus; that means your immune system is unable to respond and build defences against this variant. This makes vaccinations ineffective in dealing with this variant.

The responses to this virus have been coming in thick and fast. The UK, Singapore and Israel imposed severe movement and travel restrictions on people from Africa. Other European countries like Germany, Netherlands, Poland and Austria are following on similar lines. Now comes the problem. Europe is a major importer and consumer of oil for travel and transport. A series of travel restrictions could constrain demand badly.

Let us talk more specifically about oil. Oil slipped in the range of 11% to 13% in a single day, the sharpest fall since April 20202. In addition, the US has announced release of 50 million barrels of oil from its strategic petroleum reserves (SPR). If you add India, Japan and Korea, the glut is close to 80 million barrels or 40 days of surplus wiped out. If you add the demand contraction from the variant to this equation, you clearly have a problem in oil prices.