By Myra P. Saefong and Mark DeCambre
Crude-oil futures climbed on Tuesday, with U.S. prices settling above $70 a barrel for the first time in about two weeks, as concerns that the omicron variant of the coronavirus will reduce demand over the winter eased.
“Traders view the omicron variant of COVID as a less virulent threat, and expect global economic growth to be only marginally impacted,” said Marshall Steeves, energy markets analyst at IHS Markit.
West Texas Intermediate crude for January delivery (NYM:CL.1) picked up $2.56, or 3.7%, to settle at $72.05 a barrel on the New York Mercantile Exchange, following a 4.9% advance on Monday. Based on the front-month contract, the U.S. benchmark marked its highest value since Nov. 24, according to Dow Jones Market Data. That’s the day before the omicron variant’s emergence prompted a sharp drop in stocks and commodity prices.
February Brent crude , the global benchmark, rose $2.36, or 3.2%, to end at $75.44 a barrel on ICE Futures Europe, for a fourth straight gain. The contract logged its highest finish since Nov. 25.
Gains for crude have been aided by a confluence of factors, including stalled nuclear disarmament talks between Iran and other Western countries, reducing the chance of Iranian crude returning to the market, while fears about the omicron variant also subsided.
The outlook for oil demand has “returned to being positive, while oil supply remains tight as economies recuperate from the rock bottom situation witnessed in 2020,” said Naeem Aslam, chief market analyst at AvaTrade.
The argument for a strong future outlook for oil demand is supported by Saudi Arabia’s decision to raise prices for crude oil it sells to Asia and the U.S., and OPEC+’s judgment to stick to its plan of pumping 400,000 barrels a day into the markets in January as well, said Aslam, in a market update.
In addition, China’s imports increased 31.7% on year in November, while its exports gained 22%. Data showed that imports of oil from the world’s largest crude importer rose 14.3% to 10.17 million barrels per day in November, up from 8.9 million bpd in the month before, although still below the 11.04 million bpd from the same period last year.
Traders will get an update on U.S. petroleum supplies from the Energy Information Administration early Wednesday. The American Petroleum Institute will release its own data ahead of that late Tuesday.
On average, analysts expected the EIA to report a drawdown of 1.2 million barrels in U.S. crude stockpiles for the week ended Dec. 3, according to a survey conducted by S&P Global Platts. They also forecast U.S. supply increases of 1.4 million barrels for gasoline and 900,000 barrels for distillates.
On Nymex Tuesday, January gasoline tacked on 2.8% to $2.10 a gallon and January heating oil added 2.5% to $2.225 a gallon.
In a monthly report released Tuesday, the EIA lowered its 2021 and 2022 forecasts U.S. and global benchmark oil prices . It forecast this year’s WTI crude prices at an average $67.87 a barrel, down 1.7% from the November forecast. Brent crude is expected to average $70.60 this year, down 1.4% from the previous forecast.
The EIA also cut its oil forecasts for 2022 by 2.7% to $66.42 for WTI and by 2.6% to $70.05 for Brent.
“This is a very complicated environment for the entire energy sector,” said EIA Acting Administrator Steve Nalley, in a statement. “Our forecasts for petroleum and other energy prices, consumption, and production could change significantly as we learn more about how responses to the omicron variant could affect oil demand and the broader economy.”
Natural gas for January delivery settled at $3.708 per million British thermal units, up 1.4%, after forecasts for milder U.S. weather prompted a more than 11% drop on Monday.