Oil sees strongest week since August as virus fears abate

Bloomberg

Oil set its biggest weekly gain in more than three months as the worst fears over the new virus strain have receded.
West Texas Intermediate futures climbed 8.2% this week. Fuel consumption so far escaped any major blows from the omicron variant. Yet confidence is limited. Rallies are still punctuated by selloffs after rising infection rates prompted some governments to tighten travel restrictions.
“Crude prices are having a good week as omicron jitters have eased and as the 2022 growth outlook for the US economy remains mostly undeterred,” said Ed Moya, senior market analyst at Oanda Corp.
Oil has seen a remarkable turnaround after tumbling into a bear market on November 30, following a multi-week plunge. But concerns persist over omicron, which one study indicates is 4.2 times more transmissible than the delta strain in its early stages.
Some signs of weakness are emerging. Traders are facing the prospect of a weakening physical market for crude in Asia, despite Saudi Arabia’s move to increase oil prices for January. The prompt time-spread for global benchmark Brent has narrowed this week, pointing bearish sentiments.
Many parts of the eastern US, including New Jersey and Connecticut, are seeing a rise in hospitalisations. The City of London may be on the verge of becoming a ghost town again after firms started telling thousands of staff to work from home in response to the latest UK government guidance.
In the US, consumer prices rise last month at the fastest annual pace in nearly 40 years, magnifying persistent inflation and with consumers facing the biggest jump in energy bills in more than a decade. The inflation headline numbers continue to add pressure for the Federal Reserve to tighten monetary policy.
Brent and WTI prompt spreads slid to the lowest levels in several months, with times-preads broadly weakening, as the strength seen in outright prices at the start of the week waned. Both benchmarks tested support from their respective five-day moving averages.
The profits that companies make from turning crude oil into fuels in northwest Europe slumped last month, according to consultants Wood Mackenzie.
Meanwhile, Royal Dutch Shell shareholders approved relocation of company’s headquarters to London from The Netherlands, a country with which ties have become increasingly strained due to environmental concerns.