Saturday, December 10, 2022

Crude oil on track for four straight days of gains

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(S&P Global Platts) Crude oil futures continued to climb in mid-morning trade in Asia Dec. 9, on track for a fourth straight day of gains, as risk sentiment remained buoyant amid further positive developments around the omicron variant of the coronavirus despite a lower-than-expected fall seen in US crude oil stocks.

At 10:03 am Singapore time (0203 GMT), the ICE February Brent futures contract was up 21 cents/b (0.28%) from the previous close at $76.03/b, while the NYMEX January light sweet crude contract rose 28 cents/b (0.39%) at $72.64/b.

Risk-on sentiment across financial markets continued to drive asset prices higher. Most recently, Pfizer and BioNTech said Dec. 8 that a three-shot course of their COVID-19 vaccine can neutralise the new omicron variant in a laboratory test.

“The relief rally in markets continued as more evidence that omicron can be tackled with vaccines emerged. Sentiment was also boosted by further falls in inventories,” said ANZ Research analysts Brian Martin and Daniel Hynes in a note.

The latest news is likely to ease concerns over any risks omicron poses to oil demand, coming after a panic-driven selloff in late-November shaved 20% off oil prices.

US Energy Information Administration data Dec. 8 showed US crude oil inventories fell by a smaller-than-expected 240,000 barrels in the week ended Dec. 3 to 432.87 million barrels, as strengthened refinery demand offset rising production.

Cushing, Oklahoma crude stocks, however, rose 2.37-million-barrel to a seven-week high of 30.92 million barrels. Nationwide gasoline stocks moved 3.88 million barrels higher to 219.3 million barrels, while distillate inventories climbed 2.73 million barrels to 126.6 million barrels.

“WTI crude did not know how to react to a mixed EIA report. A small [crude oil] draw was accompanied with slightly higher production, limited Omicron impact with gasoline consumption, but softer jet fuel demand and a decline with exports,” said OANDA senior market analyst Edward Moya.

Analysts nonetheless warned that risks remained.

Several countries in Europe continue to see rising COVID-19 cases, with the UK urging work-from-home as the norm and Denmark on Dec. 8 stating it will re-impose a lighter version of the lockdowns it had last winter.

“Germany, France and the UK are all registering 50,000 and more COVID-19 cases a day. Daily deaths are also edging higher in these countries. This isn’t all, or even mostly Omicron at this stage,” said ING’s Regional Head of Research in the Asia-Pacific Robert Carnell. “But coming on top of this backdrop, a much more infectious variant is clearly not something to be shrugged off as a ‘storm in a tea-cup’.”

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