Oil gains before US stockpiles data as China tackles Omicron

Bloomberg

Oil rises as traders looked ahead to clues on US stockpiles, while monitoring China’s efforts to contain the spread of Omicron.
West Texas Intermediate added 0.9% after capping a two-day drop. The industry-funded American Petroleum Institute releases its weekly report on US inventories. Nationwide holdings have sunk for the past six weeks to the lowest since September, official data show.
Separately, the Energy Information Administration issues its short-term market outlook.
Crude has made a positive start to 2022 on expectations demand will continue to expand as the pandemic evolves, tightening the market. The climb has come despite the spread of the Omicron virus variant, including outbreaks in China, the largest crude importer. Supply halts in Libya and Kazakhstan also aided prices, as have capacity constraints faced by some Opec members.
“Volatility is increasing, spare productive capacity is declining, while demand is gaining traction despite the latest fears over Omicron,” said John Driscoll, director at JTD Energy Services Pte. “If we see any major drawdowns in EIA data this week, we could see WTI breach $80.”
A Bloomberg survey of analysts predicted a 1.7-million barrel draw from US crude inventories, while gasoline stockpiles are seen rising 3.1 million barrels.
In China, authorities locked down Anyang, a city of five million, a day after detecting Omicron in Henan province. The move underscores the nation’s commitment to eliminating Covid-19 even as highly transmissible variants circulate. While the country is due to host the Winter Olympics next month, there are no plans as yet to adjust measures for the high-profile event.
In Libya, production has been recovering in recent days as a deal with a paramilitary force enabled supplies to resume, including from the nation’s largest field, Sharara. Output from El-Feel also restarted. Still, bad weather that’s forced the closure of some local ports may impede flows.