Oil rose after Saudi Arabia boosted the prices of its crude, signalling confidence in the demand outlook despite the spread of the omicron variant of the coronavirus.
Futures in New York advanced more than 2 percent to trade near $68-a-barrel. The kingdom increased its oil prices for customers in Asia and the US for January, just days after the OPEC+ alliance agreed to boost output for the same month. Meanwhile, initial data on omicron from South Africa – the epicentre of the outbreak – doesn’t show a resulting surge of hospitalisations.
Oil capped a sixth weekly loss on Friday, the longest stretch of declines since 2018, following concerns about the outlook for energy demand as omicron led to renewed restrictions on travel. While OPEC+ decided to keep adding extra barrels to the market in January, the alliance essentially placed a floor under prices by giving itself the option to change the plan at short notice.
“The Saudi move to increase pricing is driving the market today,” said Warren Patterson, Singapore-based head of commodities strategy at ING Groep NV. “A bit of an odd move, given the supply hike in January, the omicron uncertainty and the expectation of a better supplied market in the first quarter of 2022.”
Prices:
- West Texas Intermediate for January delivery gained 2.3 percent to $67.81-a-barrel on the New York Mercantile Exchange at 10:10am in Singapore after falling 0.4 percent on Friday.
- Prices lost 2.8 percent last week.
- Brent for February settlement rose 2.1 percent to $71.33-a-barrel on the ICE Futures Europe exchange after advancing 0.3 percent on Friday.
- Brent’s prompt timespread was 41 cents in backwardation, compared with an average of $1.04 last month
Saudi Aramco raised its key Arab Light grade for customers in Asia by 60 cents from December to $3.30-a-barrel above a benchmark, according to a statement from the state producer. That followed comments last week from Aramco chief executive officer Amin Nasser that he was “very optimistic” about demand and that the market had overreacted to omicron. White House medical adviser Anthony Fauci said on Sunday that there doesn’t look to be a great degree of severity to the new strain, while cautioning it’s too early to be certain. Omicron has so far spread to at least 17 US states.
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