Oil climbs to four-week high as Omicron concerns ease

Bloomberg

Oil settled above $73 a barrel for the first time in four weeks as signs that the omicron Covid-19 variant may be less severe than previous strains eased concerns about a demand hit.
West Texas Intermediate futures in New York closed 1.4% higher amid thinning liquidity heading into the holiday period. A UK health agency said omicron was less likely to lead to hospitalizations than the Delta strain, while US regulators cleared Merck & Co’s Covid-19 pill, dissipating some of the worst fears about the variant’s effect on oil demand.
“Crude prices stabilised after a rash of mostly positive Covid vaccine/treatment headlines in the fight against omicron,” said Edward Moya, senior market analyst at Oanda Corp. “It seems all the major catalysts that await oil in the New Year lean towards higher prices,” he said.
The total number of oil contracts held by traders for crude, gasoline and diesel futures combined is at its lowest in almost six years. Both could still leave market prone to sharp moves.
Oil is heading for an annual gain following a strong rebound from the pandemic, though uncertainties stemming from the evolving nature of the virus may restrain gains. US crude futures appeared to face some resistance as they approached the 100-day moving average of $74.04. Breaking above that level could trigger further buying from
speculators, analysts said.
Exxon Mobil has extinguished a fire at its 561,000 barrel a day Baytown oil-processing facility in Texas, one of largest in the US.
Exxon spokeswoman Julie King said the company is adjusting operating rates to focus on stabilising affected unit. Gasoline’s premium over crude surged 6.1% after the news.
“The Baytown refinery fire could potentially tighten gasoline supplies in US and it’s happening while crude stocks are being drawing down domestically,” said Andrew Lebow, senior partner at Commodity Research Group.
US crude inventories dropped by 4.72 million barrels last week, and have shrunk over 10 million barrels over the past four weeks, according to government data. An energy crunch in Europe and disruptions to supply in Libya and Nigeria have also led to some tightening in oil supplies.