Omicron's impact on oil market looks troubling for stocks

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Oil price movements offer the closest reading possible of COVID\u0027s impact on the economy

Oil price movements offer the closest reading possible of COVID’s impact on the economy, primarily due to its role in powering transportation. It also has a close relationship with the stock market. The 40-day correlation between crude and equities hasn’t been this strong since August 2020, when the first wave of the coronavirus was spreading to the southern U.S., raising questions about the summer driving season.

The International Energy Agency said oil supplies are rebounding around the world, with more coming next year. Meanwhile, demand for jet fuel has already started dropping in response to the omicron variant, but the IEA says the impact is likely to be limited as vaccine booster campaigns roll out globally. From a growth perspective, it makes sense that stocks would trade on the same signals.

 

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