Oil prices dip below $75 as investors assess impacts of new Omicron variant on global markets

Oil prices fell below $75 a barrel on Wednesday, taking a breather after strong gains this week, as investors assessed the impact of the Omicron coronavirus variant on the global economy and fuel demand.

Brent crude futures were down 83 cents, or 1.1 percent, to $74.61 a barrel at 1113 GMT, after settling 3.2 percent higher on Tuesday.

US West Texas Intermediate crude was at $71.07 a barrel, down 98 cents or 1.4 percent, having gained 3.7 percent in the previous session.

After falling by more than 16 percent since November 25 to around $69 a barrel, Brent crude prices have rebounded by over 8 percent since December 1 on signs Omicron has had only a limited impact on oil demand.

"Around two thirds of the previous price slide (has) been corrected, a downswing that had been brought about by demand concerns sparked by the new Omicron variant. These now appear to be exaggerated," Commerzbank said in a note.

"There has been no noticeable slowing effect on oil demand as yet. Even aviation, the sector that should have been hit first, has seen only a marginal decrease in seating capacity."

But reports that British Prime Minister Boris Johnson was set to tighten Covid-19 restrictions, including advice to work from home, revived fears of a slow down in activity.

The market was also focused on rising geopolitical tensions as talks between Washington and Tehran over Iran's nuclear programme were set to resume this week as Western officials voiced dismay at sweeping Iranian demands. 

An easing of US sanctions is expected to lead to higher exports of Iranian oil, which could add downward pressure on oil prices.

Meanwhile, tensions between Western powers and Russia over Ukraine also remained high after US President Joe Biden warned Russian President Vladimir Putin on Tuesday that the West would impose "strong economic and other measures" on Russia if it invades Ukraine, while Putin demanded guarantees that NATO would not expand farther eastward.