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“Omicron Variant”Weekly S&P Report Xclusiv Shipbrokers Inc.

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A new coronavirus variant, B.1.1.529 or “Omicron Variant” has been reported from South African scientists. On Thursday, S. Africa announced that they are studying the recently identified strain with a worrying number of mutations. More than 100 cases have been detected to date from virologists in the country, which has created nervousness as to how transmissible it may be and whether it will prove resistant to current vaccines. These news also created nervousness in global economies during Black-Friday, which became “black” for most major markets worldwide.

WTI crude didn’t remain unaffected by the market's negative reaction from the breaking news of the Omicron variant, as Britain announced a temporary ban on flights from six countries in southern Africa and other nations like Israel and Singapore have followed, with more countries expected to follow. Crude oil had extended losses more than 13%, to USD 68.15 per barrel on Friday, the lowest level in eleven weeks. Low liquidity on a festive day in the U.S., fears of renewed lockdowns that will hurt global demand and Wall Street banks trying to get rid of oil futures, were the main reasons for the significant oil sell-off.

Oil price pressures had already started earlier the week, with oil-importing countries started to queue up behind America, as U.S. President Joe Biden announced the release of 50 million barrels from the Strategic Petroleum Reserve’s inventory. In Asia, China announced the release from its state reserves according to its actual needs, which will range from 7 -15 million barrels. Furthermore, India and Japan will release 5 million barrels each, while South Korea is yet to decide its exact volume, but the indication is in the region of 3.5 million barrels. The U.K. will release 1.5 million barrels from privately held reserves. These oil releases are a kind of loan sale to private companies, who must return the crude at a later date.

These releases from major importers are not only targeting the containment of rising energy prices, but also aim to encourage OPEC to increase output. Under its current output plan, OPEC, will only gradually increase oil production by 400,000 barrels per month with the next OPEC meeting scheduled to be held on December 2nd. But among the concerns for the Omicron variant, OPEC moved its meeting to Tuesday December 7th, so to gain more time to evaluate the impact of the new variant on the global economy and fuel demand. Many market analysts speculate that this will drive to a potential output cut instead of the planned production increase.

It is too early to draw conclusions about the significance of the new variant and how it will affect the global economy and consequently shipping industry. Despite the travel bans and the early extra measures that UK and some countries have already adopted, WHO stated it’s not clear yet if the Omicron variant causes more severe disease. It would take a few weeks to understand the impact of the new variant, as scientists work to determine how transmissible it is. There are even suspicions, that the Omicron variant may elude current vaccines, Pfizer officials and Moderna’s chief medical officer were reassuring and stated that a reformulated vaccination shot could be available early next year.

Despite the concerns about Omicron variant, most of the Baltic Indices closed positively the week on a weekly basis. BPI had the most significant increase of 14.9% while BDI and BCI followed with 8.4% and 8.2% increase, respectively. On the Tanker’s indices, BCTI achieved 5 consecutive positive closings, ending the week 6% higher than the previous. Τhe only contradictions were BHSI and BDTI which decreased 1.4% and 5.4% on a weekly basis.

Sale and Purchase:

On the dry S&P activity, clients of Pacific Rim acquired 4 Chengxi built Bulkers (36m Beam) the “Chengxi CX0832”-85K/2022 Chengxi, the “Chengxi CX0833”-85K/2022 Chengxi, the “Chengxi CX0834”-85K/2022 Chengxi & the “Chengxi CX0831”-85K/2021 Chengxi for USD 140.8mills enbloc. Furthermore, clients of Pacific Rim also purchased the 6-year-old Ultramax “Noni”-62K/2015 Nacks for USD 27.2mills.

On the wet sector, 4x LR2’s the “Front Panther”-115K/2015 Guangzhou Longxue, the “Front Puma”-115K/2015 Guangzhou Longxue, the “Front Tiger”-115K/2015 Guangzhou Longxue, & the “Front Lion”-115K/2014 Guangzhou Longxue sold for USD 160mills enbloc to clients of SFL Corporation. Moreover, the LR1 “Amazon Brilliance”-73K/2005 HHI fetched region USD 12mills. Finally, on the MR2 sector, the “Arctic Bay”-48K/2006 STX, sold for USD 11.5mills on subs to clients of Atlantica Shipping.

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