Omicron, return of travel bans dampen oil future, air travel
For many economies dependent on commodities trading, there are concerns for the recovery recently recorded as oil prices slumped by over 10 per cent across the board, hovering at $72 a barrel from the rally of $80.
The black liquid benchmarks had one of their worst weekly performances last week with both contracts losing over $10 a barrel on Friday, representing their largest one-day drop since April 2020.
Both benchmarks were set to reverse their four-week losing streak, posting over three per cent gain as of mid-week. However, a new variant of the coronavirus, which is reportedly vaccine-resistant, caused panic selling of the black liquid.
The sell-off was prompted by the discovery in South Africa of a new Coronavirus variant, dubbed Omicron by the World Health Organisation (WHO) last week.
The WHO said it is concerned about the variant’s large number of mutations and said “preliminary evidence suggests an increased risk of re-infection” when compared with other strains of the virus.
The variant’s swift spread among young people in South Africa has alarmed health professionals even though there was no immediate indication whether the variant causes more severe disease.
With Nigeria unable to take advantage of higher oil prices due to poor production capacity aggravated by technical disruptions, a lower oil price offers an advantage of reduced subsidy payments but lower revenue to the Federal Government.
Also, adding to the selling pressure is the coordinated release of oil reverse to the public, orchestrated by the United States. Earlier in the week, the U.S. Department of Energy announced the release of 70 million barrels of crude oil from the Strategic Petroleum Reserve (SPR).
Though U.S. President, Joe Biden, had sought the Department of Energy’s release of at least 70 million barrels of oil from the Strategic Petroleum Reserve (SPR), which is equivalent to about two days of OPEC+ output, in a bid to lower high gasoline prices, the movie did not achieve the desired objective, until the announcement of a new COVID-19 variant was made.
OPEC and its allies are expected to meet this week to decide whether to stick with its plan to gradually restore, in monthly 400,000 b/d increments, the crude production is removed from the market last year.
OPEC+ is weighing its supply options after the U.S.-led attempt to lower prices by releasing stocks has been complicated by a major sell-off on resurgent demand fears on a new COVID variant.
STAKEHOLDERS noted that the reintroduction of targeted travel bans could also slow the recent recovery in air travel right before the holiday season, and stall operations that are just making a restart after a long layover.
Already, the Nigerian flag carrier, Air Peace, and embattled South African Airways (SAA) are anxiously waiting for the Presidential Task Force on COVID-19 to take a decision on flights from South Africa. While Air Peace currently operates the Lagos-Johannesburg route, SAA is making a return to the Lagos route on December 12.
As at yesterday, Air Peace said it’s Johannesburg scheduled flights remain in operation, but stakeholders query the “laid back” approach of the Federal Government to such emergencies.
Chairman of the Airline Passenger Joint Committee of the International Air Transport Association (IATA), Bankole Bernard, said the Federal Government needs to be proactive and immediately suspend flights from South Africa, like several countries, are doing.
“Keeping quiet, as usual, will not be in our interest as a country. Besides the risk of bringing the virus home, Nigeria also risks ban by the rest of the world once the variant is detected here. If U.S., Europe and the likes are placing restrictions, then it is a serious issue that Nigeria should not take lightly in our casual manner,” Bernard said.
The travel expert, however, disagrees that the new set of restrictions and ban on flights would affect the recent rebound in air traffic. Bernard said the travelling public were locked down for too long such that another round of lockdown would be less effective.
“Just the way food is a necessity to human survival, so is travel. People are finding all means possible to travel. So, travel restrictions will not affect the current rebound.”
Globally, the South African route is fast becoming a no-flight zone with attendant effects on shares of European airlines. IAG shares fell by 14.8 per cent, Lufthansa by 12.8 per cent, and Air-France-KLM 9.7 per cent, Easyjet 11.4 per cent and Ryanair 12.1 per cent.
There are 122 flights between the U.S. and South Africa scheduled for December, according to aviation consulting firm, Cirium.
United, which has the most scheduled service with 87 flights, is set to resume nonstop flights between its Newark, New Jersey hub and Cape Town next month.
British Airways will operate 214 flights between London and South Africa next month, while Virgin Atlantic will operate 75, according to Cirium.
Yesterday, Dubai International Airport-based Emirates suspended flights to three African countries until further notice. In a statement, the Gulf State carrier announced that it will be suspending flights to and from South Africa, Zambia, and Zimbabwe from November 27.
The move by Emirates to suspend flights follows the United Arab Emirates (UAE) decision to ban entry into the country from seven nations. They are South Africa, Namibia, Botswana, Zimbabwe, Mozambique, Lesotho and Eswatini (Swaziland).
UAE’s neighbours, Bahrain and Saudi Arabia have also banned all flights from the above countries and say they will remain in place until more is known about the new strain.
Already, the government of Indonesia has banned the entry of travellers who have been in eight African countries, including Nigeria, and extended quarantine times for all arrivals to curb the spread of the Omicron variant. The ban extends to people who have been in South Africa, Botswana, Namibia, Zimbabwe, Lesotho, Mozambique, Eswatini or Nigeria in the past 14 days.
Delegates attending G20 meetings, which Indonesia chairs, will not be affected.
First discovered in South Africa, Omicron has since been recorded in the Netherlands, Denmark, Belgium, Botswana, Germany, Hong Kong, Israel, Italy and the United Kingdom.
The discovery of Omicron, dubbed a “variant of concern” on Friday by the WHO, sparked worries that it could resist vaccines and prolong the nearly two-year COVID pandemic.
Omicron is potentially more contagious than previous variants, but experts do not know yet if it will cause more or less severe COVID-19.
At the weekend, Dutch health authorities said 61 passengers from two flights from South Africa tested positive for COVID-19 and the results were being examined for the new Omicron variant.
The people who tested positive were now being quarantined in a hotel near Amsterdam’s Schiphol Airport, where the 600 people on board the two planes from Johannesburg spent hours waiting on Saturday.
“We now know that 61 of the results were positive and 531 negatives,” the Dutch Health Authority (GGD) said in a statement.
“The positive test results will be examined as soon as possible to determine whether this concerns the new worrisome variant, which has since been given the name Omicron variant.”
FEARS of the virulence of the new strain and how effective current vaccines are against it prompted Israel to issue a 14-day travel ban on foreigners entering the country. Israeli citizens can return but must quarantine upon their arrival.
There is currently a shortage of real-world data about the new COVID-19 variant. Despite not having firm scientific evidence to back up decisions, governments have been forced to act, fearing doing nothing may be far worse.
IATA, which represents over 290 global airlines, in a statement, said governments were responding to the risks of the new coronavirus variant in “emergency mode causing fear among the travelling public.
“As quickly as possible, we must use the experience of the last two years to move to a coordinated data-driven approach that finds safe alternatives to border closures and quarantine. Travel restrictions are not a long-term solution to control COVID variants.”
IATA had announced a moderate rebound in air travel in September 2021 compared to August’s performance. This was driven by a recovery in domestic markets, in particular China, where some travel curbs were lifted. International demand, meanwhile, slipped slightly compared to the previous month.
To sustain the upswing, the body had called on governments to adopt simple, predictable and practical measures to safely and efficiently facilitate the ramping-up of international travel as borders this season.
IATA urged governments to focus on simplified health protocols, digital solutions to process health credentials, and COVID-19 measures proportional to risk levels with a continuous review process.
IATA’s Deputy Director-General, Conrad Clifford, said as governments are establishing processes to re-open borders, in line with what they agreed in the Ministerial Declaration of the ICAO High-Level Conference of COVID-19, the Blueprint will help them with good practices and practical considerations.
“Travel is important. Pre-pandemic, some 88 million livelihoods were directly connected to aviation. And the inability to travel freely by air has impacted the quality of life for billions of people. We know that travellers feel confident with the implementation of the COVID-19 safety measures,” Clifford said.
BUT the WHO, yesterday, decried a growing number of countries imposing flight bans on southern African nations due to concerns over the new Omicron variant and urged nations to follow science and the International Health Regulations (2005).
South Africa followed International Health Regulations and as soon as its national laboratory identified the Omicron variant, informed WHO of this on November 24.
WHO Regional Director for Africa, Dr. Matshidiso Moeti, in a statement, yesterday, said: “The speed and transparency of the South African and Botswana governments in informing the world of the new variant is to be commended. WHO stands with African countries, which had the courage to boldly share life-saving public health information, helping protect the world against the spread of COVID-19.
“On the eve of a special session on pandemic preparedness, I urge all countries to respect their legal obligations and implement scientifically-based public health actions. It is critical that countries, which are open with their data are supported as this is the only way to ensure we receive important data in a timely manner.”
While investigations continue into the Omicron variant, WHO recommends countries to take a risk-based and scientific approach and put in place measures, which can limit its possible spread.
“With the Omicron variant now detected in several regions of the world, putting in place travel bans that target Africa attacks global solidarity. COVID-19 constantly exploits our divisions. We will only get the better of the virus if we work together for solutions.
A public health expert, Dr Gabriel Adakole, has called on the Presidential Steering Committee (PSC) on COVID-19, to look into the possibility of returning the requirement of wearing facemask/shields following the threats from the COVID-19 Omicron variant. He added that the PSC should tighten the country’s rules on mask-wearing and on testing of international arrivals across all airports.
He noted that the committee should return any protections that the country would need in preventing further surge.
“PSC needs to continue comprehensive and tailored public health and social measures to prevent transmission, the earlier the protective measures are implemented, the less restrictive they would need to be in order to be effective.
“The more COVID-19 circulates, the more opportunities the virus will have to change and mutate, and the pandemic will last longer,” he added.
Meanwhile, he called on the Nigeria Centre for Disease Control (NCDC) to scale up surveillance, strengthen public health and social measures.
“The NCDC must enhance surveillance and sequencing while assessing the risk of importation through international travel based on updated information on circulating variants and response capacities and take measures accordingly.
“Though our COVID-19 cases have been declining, the surge in cases elsewhere in the world and confirmation of a new Variant of Concern is a reminder of the persisting risk and the need for us to continue to do our best to protect against the virus and prevent its spread. At no cost should we let our guards down,” he explained.