Oil rallies amid reduced fears of Omicron-induced drop in demand

Bryan Mound Strategic Petroleum Reserve, an oil storage facility, is seen in this aerial photograph over Freeport, Texas, USA, April 27, 2020. REUTERS / Adrees Latif / File Photo

NEW YORK, Dec.23 (Reuters) – Oil prices rebounded in a low volume session on Thursday, a sign that the worst effects of the Omicron variant may be more manageable than previously feared, even as the countries imposed travel restrictions on increasing infection levels.

The oil market has hesitated in recent days over the severity of the threat of a further decline in fuel demand. The Omicron variant is more transmissible than previous variants of the coronavirus, but early data suggests it causes a milder level of disease.

Brent crude futures were up $ 1.56, or 2.1%, to $ 76.85 a barrel, the highest close since November 26 and a gain of 4.5% over the week.

US West Texas Intermediate (WTI) crude futures ended up $ 1.03, or 1.4%, at $ 73.79 per barrel, to rise 4.1% on the week. Volume was low on Thursday, with just 244,000 contracts traded in the first month, according to data from Refinitiv Eikon, compared to a daily average of 381,000 contracts in the past 200 days.

“The destruction of demand that everyone thought it was going to happen will not happen,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.

However, some governments are imposing stricter travel restrictions to slow the spread of the variant, which could affect demand even if Omicron drives the level of hospitalization down, especially among those vaccinated.

The Chinese city of Xian on Wednesday ordered its 13 million people to stay at home, while Scotland imposed collection limits from December 26 for up to three weeks, and two Australian states reimposed the warrants mask. Read more

The United States has cleared separate COVID-19 antiviral pills made by both Pfizer and Merck, and U.S. Food and Drug Administration officials have said the drugs are both effective against the Omicron variant. Read more

AstraZeneca has said that a three-dose course of its COVID-19 vaccine is effective against Omicron, citing data from a University of Oxford laboratory study. Read more

Operating U.S. oil and gas rigs hit their highest levels since April 2020 in the most recent week, according to energy services firm Baker Hughes. Global counts are now at 586, suggesting an increase in production in the coming months.

Four people were injured in a fire at Exxon Mobil’s refinery in Baytown, one of the largest in the United States. The fire is extinguished and the refinery adjusts production at the facility, which has the capacity to process up to 560,000 barrels per day. Read more

Additional reporting by Shadia Nasralla; Editing by Pravin Char, Sonya Hepinstall and Jonathan Oatis

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