Oil Prices Rise as Concerns Over Demand Recede

Oil prices extended gains on Tuesday with prices trading near the previous day’s one-month high on hopes that the Omicron coronavirus variant will have a limited impact on fuel demand.

Brent crude rose 7 cents, or 0.1%, to $78.67 a barrel, by 0728 GMT. U.S. West Texas Intermediate (WTI) crude rose 17 cents, or 0.2%, to $75.74 a barrel, gaining for a fifth straight session.

“Worries regarding Omicron are easing across the globe, resulting in some optimism over demand … Prices are expected to trade with positive bias,” said Abhishek Chauhan, head of commodities at Swastika Investmart Ltd.

England will not get any new COVID-19 restrictions before the end of 2021, British health minister Sajid Javid said on Monday, as the government awaits more evidence on whether the health service can cope with high infection rates.

However, the upside to prices remained limited after more than 1,300 flights were cancelled by U.S. airlines on Sunday as COVID-19 reduced the number of available crews while several cruise ships had to cancel stops.

China’s local symptomatic coronavirus cases rose for a fourth consecutive day on Monday, with Xian reporting more infections in a flare-up that has put the city’s 13 million residents under lockdown.

Oil prices have risen around 50% this year, supported by recovering demand and supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+.

“Volumes are thin because of holidays, and markets have already digested Omicron concerns. So, the focus is on the January 4 meeting of OPEC+,” Ajay Kedia, director at Kedia Commodities said.

Investors are awaiting an OPEC+ meeting on Jan. 4, at which the alliance will decide whether to go ahead with a planned 400,000 barrels-per-day production increase in February.

At its last meeting, OPEC+ stuck to its plans to boost output for January despite Omicron.

Money managers raised their net long U.S. crude futures and options positions in the week to Dec. 21, the U.S. Commodity Futures Trading Commission said on Monday.

The speculator group raised its combined futures and options position in New York and London by 4,634 contracts to 259,093 during the period.