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Oil Extends Gains Above $70 on Signs Omicron Concerns O...

Business Maverick

International Finance

Oil Extends Gains Above $70 on Signs Omicron Concerns Overdone

Oil storage tanks at the GS Caltex Corp. oil terminal in Incheon, South Korea, on Wednesday, Nov. 24, 2021. The U.S. will release 50 million barrels of crude from its strategic reserves in concert with China, Japan, India, South Korea and the U.K. -- an unprecedented, coordinated attempt by the world’s largest oil consumers to tame prices that risks a backlash by OPEC+. Photographer: SeongJoon Cho/Bloomberg
By Bloomberg
07 Dec 2021 0

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% 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 Monday for crude set to be released from the U.S. 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 some losses after sliding for six weeks

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 Dec. 14, at least two international oil refiners have expressed interest, people familiar said.

  • West Texas Intermediate for January climbed 1.1% to $70.23 a barrel at 9:59 a.m. Singapore time on the New York Mercantile Exchange after advancing 4.9% on Monday.
  • Brent for February settlement rose 0.9% to $73.72 on the ICE Futures Europe exchange after surging 4.6% 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.

Other oil-market news:
  • BP Plc said the world’s most important oil-price complex is subject to “increasingly regular dislocations” in value.
  • Oil will exceed $75 a barrel in the coming months, according to Iraq’s Oil Minister Ihsan Abdul Jabbar Ismaael.
  • Halliburton Co. warned that the world is headed into a period of scarcity for oil after seven years of underinvestment.

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