U.S. crude oil futures Tuesday clinched a fifth straight gain, but finished off the highs of the session, as investors wagered that the omicron variant of coronavirus would have only limited impact on economic growth. Low trading volumes amid the Christmas and New Year holiday also were amplifying volatility, analysts said.
The rise in crude prices gained some support after the U.K. said that it wouldn’t impose any further restrictions on consumer mobility in England as COVID infections rise, though it was reviewing the impact of the disease on hospitals. Holiday travel has been impeded by flight cancellations resulting from COVID-related staff shortages around the globe, but the U.S. Centers for Disease Control and Prevention has reduced the recommended isolation period for people infected with COVID-19 to 5 days from 10 as recent preliminary studies have suggested the omicron variant may be more transmissible but less severe than other COVID strains. “Crude oil is higher today on the CDC pullback in the Covid quarantine period, but is down significantly from levels seen earlier in the day,” wrote Robert Yawger, executive director energy futures at Mizuho Securities USA.
West Texas Intermediate crude for February delivery traded 41 cents, or 0.5%, higher to settle at $75.98 a barrel on the New York Mercantile Exchange, after the U.S. benchmark rose 2.4% on Monday. The contract had touched an intraday high Tuesday at $76.92 before retreating. The fifth consecutive advance for WTI matches a similar rally ended Sept. 27. February Brent crude, the global benchmark, advanced 34 cents, or 0.4%, to trade at $78.94 a barrel on ICE Futures Europe, following a 3.2% gain a day ago. The contract has risen in five of the past six sessions and was around its highest level since Nov. 25, according to Dow Jones Market Data. “In my opinion, it looks more to me that the Santa Claus rally is starting to run out of momentum, with the S&P 500 struggling to stay in the green, NASDAQ technology stocks already in the red, and the Bloomberg Commodity Index threatening to post its first down day in the past five days,” the Mizuho analyst wrote.
Some economists see the spread of the virus as a hurdle for global economic growth. Mark Zandi, chief economist at Moody’s Analytics, downgraded his first-quarter U.S. gross domestic product forecast to 2.2% growth from 5.2% as he “can see the economic damage mounting going into the first quarter,” The Wall Street Journal reported. A weaker economy could be a drag for oil uptake.
Looking ahead, investors are watching for a meeting between the Organization of the Petroleum Exporting Countries and its allies, including Russia, a group known as OPEC+, which is scheduled for Jan. 4.
OPEC+ will assess its plans to boost daily oil production among its members to 400,000 bpd starting in February or adjust its output to factor the spread of COVID.
