Oil extended gains on optimism the omicron virus variant may not be as bad as anticipated, easing concern over the demand outlook.
Futures in New York advanced above $70 after closing almost 5 percent higher on Monday. Initial data shows that the surge in omicron cases hasn’t overwhelmed hospitals so far, but some nations have still implemented restrictions on travel that’s expected to crimp jet fuel demand. Meanwhile, companies lodged bids on Monday for crude set to be released from the US strategic reserve.
“It’s likely to be a slow grind higher if optimism is sustained, but marked by plenty of volatility,” said Vandana Hari, founder of Vanda Insights. “Sentiment will remain highly susceptible to even hints of omicron’s destructive power.”
Oil is clawing back losses after sliding over the past six weeks in part due to the emergence of the new coronavirus variant and signs that major consumers would tap emergency crude stockpiles to tame surging prices. Saudi Arabia’s move on Sunday to increase the cost of its crude for January gave the market confidence the demand outlook would remain robust.
The release of crude from the Strategic Petroleum Reserve is part of the Biden administration’s effort to tackle surging gasoline prices. While the winning bids for the first 32 million barrels won’t be announced until December 14, at least two international oil refiners have expressed interest, people familiar said.
Prices:
- West Texas Intermediate for January climbed 1.1 percent to $70.23-a-barrel at 9:59am Singapore time on the New York Mercantile Exchange after advancing 4.9 percent on Monday.
- Brent for February settlement rose 0.9 percent to $73.72 on the ICE Futures Europe exchange after surging 4.6 percent on Monday.
- The prompt timespread for Brent was 40 cents in backwardation, compared with $1.34 at the start of last month.
Omicron has prompted France to shut nightclubs for four weeks, while New York City called for a private sector vaccine mandate and Hong Kong imposed quarantine requirements on more countries. Energy Aspects cut its forecasts for jet fuel and oil demand following curbs on air travel.
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