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Oil futures traded higher on Wednesday, finding ongoing support from news suggesting that the omicron variant of the coronavirus may not disrupt economies as much as feared.
Prices briefly turned lower in the wake of data showing only a modest weekly decline in U.S. crude supplies and a bigger-than-expected climb in product inventories.
“Traders are starting to realize that omicron, though it may cause some slight demand destruction, is not going to be as deadly as feared,” Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch.
“Oil prices did dip after the U.K. suggested that there might be a limited restrictions put in place,” but after Pfizer Inc.
PFE,
and BioNTech SE
BNTX,
announced that three vaccine shots could neutralize the variant, that seemed to bring the oil market back,” he said.
The news helped to ease the risk of a bigger economic impact, which would hurt energy demand.
A report from Pfizer and BioNTech SE said results from an “initial laboratory study” showed that their COVID-19 vaccine neutralized the omicron variant of the coronavirus after three doses, or the full two-dose regimen plus a booster shot.
West Texas Intermediate crude for January delivery
CLF22,
CL.1,
rose by 40 cents, or 0.6%, to trade at $72.45 a barrel on the New York Mercantile Exchange, after trading as low as $70.91. Prices rallied 3.7% on Tuesday to mark a second straight gain.
February Brent crude
BRNG22,
BRN00,
the global benchmark, was up 32 cents, or 0.4%, to reach $75.76 a barrel on ICE Futures Europe, after rising 3.2% a day ago for a fourth straight gain.
On Wednesday, the Energy Information Administration reported that U.S. crude inventories fell by 200,000 barrels for the week ended Dec. 3. That marked a second weekly decline, as the EIA data had shown a 900,000-barrel fall for the week ended Nov. 26.
On average, however, analysts had forecast a larger 1.2 million-barrel decline in the latest week, according to a poll conducted by S&P Global Platts. The American Petroleum Institute on Tuesday reported a 3.1 million-barrel decrease, according to sources.
The data also showed stocks in the U.S. Strategic Petroleum Reserve declined by 1.7 million barrels to 600.9 million barrels last week, while total domestic petroleum stocks inched up by 100,000 barrels to 11.7 million barrels per day. Crude stocks at the Cushing, Okla., Nymex delivery hub edged up by 2.4 million barrels for the week.
The EIA also reported weekly inventory increases of 3.9 million barrels for gasoline and 2.7 million barrels for distillates. The S&P Global Platts survey expected supply climbs of 1.4 million barrels for gasoline and 900,000 barrels for distillates.
On Nymex, January gasoline
RBF22,
added 1.7% to $2.137 a gallon and January heating oil
HOF22,
edged up by 1.5% to $2.259 a gallon.
Overall momentum in oil is “being built on the fact that the demand destruction might not be as bad as feared,” said Flynn.
Meanwhile, the latest S&P Global Platts survey showed that oil output from the Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+, rose by 500,000 barrels per day in November.
“The collective OPEC+ output of 41.71 million [barrels per day]was the group’s highest in 19 months, but still 4.15 million b/d below what it pumped in April 2020, when Saudi Arabia and Russia launched an oil price war,” the survey said.
While OPEC+ production did increase, “it’s still far short of the numbers that they promised,” said Flynn.
Rounding out action on Nymex, natural-gas futures for January delivery
NGF22,
traded at $3.862 per million British thermal units, up 4.1%, with prices poised for a second straight gain.
