By Myra P. Saefong and Mark DeCambre
U.S. oil prices marked their highest settlement in two weeks Wednesday, finding ongoing support from news suggesting that the omicron variant of the coronavirus may not disrupt economies as much as feared.
Prices briefly turned lower in the wake of data showing only a modest weekly decline in U.S. crude supplies and a bigger-than-expected climb in product inventories.
“Traders are starting to realize that omicron, though it may cause some slight demand destruction, is not going to be as deadly as feared,” Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch.
“Oil prices did dip after the U.K. suggested that there might be limited restrictions put in place,” but after Pfizer Inc. /zigman2/quotes/202877789/composite PFE -1.05% and BioNTech SE /zigman2/quotes/214419716/composite BNTX -4.47% announced that three vaccine shots could neutralize the variant, that seemed to bring the oil market back,” he said.
British Prime Minister Boris Johnson announced tighter restrictions Wednesday to stem the spread of the omicron variant, urging people in England to again work from home and mandating COVID-19 passes for entrance into nightclubs and large events.
However, a report from Pfizer and BioNTech SE said results from an “initial laboratory study” showed that their COVID-19 vaccine neutralized the omicron variant of the coronavirus after three doses, or the full two-dose regimen plus a booster shot.
The news helped to ease the risk of a bigger economic impact, which would hurt energy demand.
West Texas Intermediate crude for January delivery /zigman2/quotes/211629951/delayed CL.1 +0.15% rose by 31 cents, or 0.4%, to settle at $72.36 a barrel on the New York Mercantile Exchange — the highest front-month finish since Nov. 24, according to Dow Jones Market Data. Prices had traded as low as $70.91 Wednesday, after rallying 3.7% Tuesday to mark a second straight gain.
February Brent crude , the global benchmark, added 38 cents, or 0.5%, to settle at $75.82 a barrel on ICE Futures Europe, after rising 3.2% a day ago. The contract marked a fifth straight session gain, at the highest finish since Nov. 25.
On Wednesday, the Energy Information Administration reported that U.S. crude inventories fell by 200,000 barrels for the week ended Dec. 3. That marked a second weekly decline, as the EIA data had shown a 900,000-barrel fall for the week ended Nov. 26.
On average, however, analysts had forecast a larger 1.2 million-barrel decline in the latest week, according to a poll conducted by S&P Global Platts. The American Petroleum Institute on Tuesday reported a 3.1 million-barrel decrease, according to sources.
The data also showed stocks in the U.S. Strategic Petroleum Reserve declined by 1.7 million barrels to 600.9 million barrels last week, while total domestic petroleum stocks inched up by 100,000 barrels to 11.7 million barrels per day. Crude stocks at the Cushing, Okla., Nymex delivery hub edged up by 2.4 million barrels for the week.
The EIA also reported weekly inventory increases of 3.9 million barrels for gasoline and 2.7 million barrels for distillates. The S&P Global Platts survey expected supply climbs of 1.4 million barrels for gasoline and 900,000 barrels for distillates.
On Nymex, January gasoline added 2.3% to $2.149 a gallon and January heating oil edged up by nearly 1.7% to $2.261 a gallon.
Oil prices rose despite the “soft” EIA supply data, indicating that the post-Thanksgiving selloff in energy markets amid omicron concerns was “overdone,” said Tyler Richey, co-editor at Sevens Report Research.
The decision by the Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+, to leave their December meeting open also introduced an “OPEC+ put” in the market, with speculators “hesitant to sell this market short knowing that OPEC+ could act at any time to support prices” in coming weeks, Richey told MarketWatch.
The latest S&P Global Platts survey showed that OPEC+ oil output rose by 500,000 barrels per day in November.
“The collective OPEC+ output of 41.71 million [barrels per day]was the group’s highest in 19 months, but still 4.15 million b/d below what it pumped in April 2020, when Saudi Arabia and Russia launched an oil price war,” the survey said.
While OPEC+ production did increase, “it’s still far short of the numbers that they promised,” said Flynn.
Traders will likely monitor talks between Iran and world powers planned for Thursday , as negotiations to revive the 2015 nuclear deal move forward. An agreement would likely lead the U.S. to ease sanctions on Iran, allowing it to contribute more oil to global markets.
Rounding out action on Nymex, natural-gas futures for January delivery settled at $3.815 per million British thermal units, up 2.9%, with prices up second consecutive session.