West Texas Intermediate crude for February delivery fell 52 cents, or 0.6%, to settle at $82.12 a barrel on the New York Mercantile Exchange. March Brent crude, the global benchmark, lost 20 cents, or 0.2%, at $84.47 a barrel on ICE Futures Europe. WTI and Brent both finished Wednesday at their highest since Nov. 9. Among the petroleum products traded on Nymex, February gasoline fell 0.3% to $2.384 a gallon, while February heating oil edged up by nearly 0.6% to $2.609 a gallon.

Crude got a boost Wednesday after the EIA reported a larger-than-expected 4.6 million-barrel fall in U.S. crude supplies for the week ended Jan. 7. Supplies, excluding those in the Strategic Petroleum Reserve, stood at 413.3 million barrels, the lowest since 2018. “Although the fall in crude inventory was expected, rising gasoline stockpiles helped by further [SPR] releases by the Biden administration have helped level off prices,” said Louise Dickson, senior market analyst at Rystad Energy. “It remains to be seen whether this balance will last or if more bullish sentiment will return as the economy rebounds in the coming weeks.” “However, downside risk remains as the demand for refined products continues to slump, keeping prices in check,” she said, in a note. WTI remains up more than 9% since the start of the new year, while Brent is up more than 8% over the same stretch.

A record number of patients are currently in U.S. hospitals with COVID-19, but scientists see signs that the infection wave driven by the highly contagious omicron variant may be nearing a peak.

Dickson said Brent’s march toward $85 a barrel reflected optimism over Europe’s economic outlook and prospects for oil consumption, boosted by the by the lifting of restrictions to slow the spread of omicron by some countries in Europe.

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On Wednesday, however, the Energy Information Administration reported a 4.6 million-barrel fall in U.S. crude suppliers for the week ended Jan. 7, to 413.3 million barrels, excluding stocks in the Strategic Petroleum Reserve. That was the lowest weekly supply reading since 2018, EIA data show. Crude supplies also marked a seventh-straight weekly decline, and came in well above the average 1.6 million barrel decrease expected by analysts polled by S&P Global Platts. The American Petroleum Institude on Tuesday reported a 1.1 million-barrel fall.

West Texas Intermediate crude for February delivery rose $1.42, or nearly 1.8%, to settle at $82.64 a barrel on the New York Mercantile Exchange. March Brent crude, the global benchmark, climbed 95 cents, or 1.1%, to $84.67 a barrel on ICE Futures Europe. Prices for both front-month contracts finished the session at their highest since Nov. 9, FactSet data show.

The EIA also reported weekly inventory increases of 8 million barrels for gasoline and 2.5 million barrels for distillates. The S&P Global Platts survey expected supply gains of 3 million barrels for gasoline and 2 million barrels for distillates. On Nymex Wednesday, February gasoline tacked on 1.4% to $2.391 a gallon and February heating oil rose 1.2% to $2.594 a gallon.

“With such a rapid spreading virus leaving a large percent of the population sick at the same time, and given that cases are multiples higher than the previous seasonal COVID peaks, this has meant a sharp drop in driving and economic activity,” said Troy Vincent, senior market analyst at DTN. “This has caused U.S. gasoline inventories to surge by over 18 million barrels in the past two weeks alone.” From here, “demand during this seasonally weak travel period will be key, along with the length of any unplanned outages in countries like Libya and Kazakhstan,” said Schneider Electric’s Fraser.

The EIA data, meanwhile, showed crude stocks at the Cushing, Okla., Nymex delivery hub edged down by 2.5 million barrels for the week, while total domestic petroleum production fell 100,000 barrels to 11.7 million barrels per day. Crude oil stocks at the Strategic Petroleum Reserve fell modestly to 593.4 million barrels, down 300,000 barrels for the week.

West Texas Intermediate crude for February delivery rose $2.99, or 3.8%, to settle at at $81.22 a barrel on the New York Mercantile Exchange. That was the highest front-month contract prices finish since Nov. 11, according to Dow Jones Market Data. March Brent crude, the global benchmark, rose $2.85, or 3.5%, to $83.72 a barrel on ICE Futures Europe — the highest settlement since Nov. 9. Both WTI and Brent have rallied nearly 8% so far in 2022. Among the petroleum products, February gasoline rose 3.6% to $2.357 a gallon and February heating oil added 3.1% to $2.564 a gallon.

Tuesday’s gains came despite reports that production in Libya had recovered and that activity at Kazakhstan’s Tengiz oil field had returned to normal. Worries about hits to production in the two countries had helped to lift crude last week. Oil production in Libya has returned to 1 million barrels a day after militias lifted a three-week blockade of oil fields, including the nation’s largest, Bloomberg reported. Chevron Corp., which leads the Tengizchevroil consortium, said production at Kazakhstan’s 600,000-barrel-a-day Tengiz oil field has returned to normal after being disrupted by unrest last week, according to Argus. While exports from Libya’s western oil ports are likely to begin again soon, exports “from most of Libya’s other oil ports have been suspended due to bad weather this week, meaning that the higher oil production in the country has not yet translated directly into an increase in available oil supply,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note. “This may explain why oil prices have not responded as yet to the reopening of the Libyan oil fields.”

Traders are also closely watching tensions within Kazakhstan but there has not been any meaningful impact to oil production, said Velandera Energy’s Raj. “Traders are factoring in a low likelihood of widespread production disruptions,” he said. “Since Kazakhstan has consistently exceeded its OPEC+ quota, a small disruption will only bring it back to compliance.” OPEC+, comprised of the Organization of the Petroleum Exporting Countries and its allies, saw production quota compliance rise to 116.5% in December, but the 19 members subject to the output targets pumped some 620,000 barrels per day below their combined caps, according to an S&P Global Platts survery released Tuesday.

The report on the survey results said Platts Analytics still expects the market to be oversupplied in the first three months of the year, but estimates OPEC+ sustainable spare production capacity will shrink to 800,000 b/d by June if it maintains its monthly quota rises, creating “an uncomfortably thin market buffer in the second half of the year.”

Still, the Energy Information Administration expects annual U.S. production to reach a record next year.  In a monthly report Tuesday, the government agency sees output rising to 12.4 million barrels per day in 2023, the highest annual average on record. Meanwhile, tensions between Russia and Ukraine effect “natural-gas volatility, but not so much oil prices, as Ukraine is the main channel to transport Russian gas to Western Europe,” Raj said.

Weekly data on U.S. petroleum supplies from the EIA will be released on Wednesday. On average, analysts polled by S&P Global Platts forecast a decline of 1.6 million barrels in U.S. crude supplies for the week ended Jan. 7. They also expect to see inventory increases of 3 million barrels for gasoline and 2 million barrels for distillates.

“As far as the geopolitical tensions go, the various conflicts and threats across eastern Europe and the Middle East will remain supportive for energy in the near term,” he said. However, “it already appears that some of the supply and production disruptions are being sorted out, so that could result in a ‘sell the news’ reaction from markets in the sessions ahead, pending any new developments.” Oil supply took a hit last week on the back of protests in Kazakhstan, while Libya has seen declines in oil output due to pipeline maintenance, weeks after militias first shut down major oil fields. Around 300,000 barrels per day of oil production remained shut in as a blockage at Libya’s key western oil fields remained in place, sources told S&P Global Platts on Monday, but the country’s output has recovered to around 900,000 barrels per day after pipeline maintenance at the eastern Waha oil fields was completed.

Near term, Richey at Sevens Report Research said he expects U.S. benchmark oil prices to see some consolidation back toward $75 a barrel “as recent gains are digested,” however a deeper correction is “possible if the fundamental outlook continues to deteriorate.”

West Texas Intermediate crude for February delivery fell 67 cents, or nearly 0.9%, to settle at $78.23 a barrel on the New York Mercantile Exchange, after posting a loss on Friday. March Brent crude, the global benchmark, declined by 88 cents, or 1.1%, at $80.87 a barrel on ICE Futures Europe. Last week, WTI, the U.S. benchmark, rose 4.9%, while Brent advanced more than 5%.

Worries about COVID’s impact on demand continued to pressure oil. Chinese authorities in the northern coastal city of Tianjin, after the detection of two cases of COVID-19 caused by the omicron variant of the coronavirus, ordered the testing of millions of people weeks ahead of the start of the Winter Olympics in nearby Beijing. China has been sticking to a “zero-COVID policy” entailing strict lockdowns and mass testing in response to outbreaks. “While we see other countries adapting to live with COVID, China clearly continues to pursue its zero-COVID policy,” said Warren Patterson, head of commodities strategy at ING, in a note. “This is a risk to oil demand since China is the largest crude oil importer in the world. We are also approaching Chinese New Year, a time when there is normally plenty of domestic travel, and so any domestic restrictions will weigh on oil consumption.”

But supply concerns may remain a bigger factor, he said, given unrest in Kazakhstan and output outages in Libya. Chevron said the Tengizchevroil consortium it leads is gradually restoring production at Kazakhstan’s Tengiz oil field after civil unrest led to a reduction in output by an unspecified amount last week, according to news reports. The country produces about 2.1% of global oil production and any impact to output could be short lived, said Rohan Reddy, analyst at global exchange-traded funds provider Global X. Even if there is a prolonged impact, other countries like the U.S., could “step in to fill the void left by lost Kazakh production.”

Meanwhile, U.S. and Russian negotiators held talks in Geneva Monday amid Moscow’s military buildup near Ukraine, but Deputy U.S. Secretary of State Wendy Sherman referred to the event as a “discussion,” and “not what you call a negotiation,” according to The Wall Street Journal.  Further meetings are expected to be held in Brussels and Vienna later this week.

In other Nymex dealings, February gasoline shed 1% to $2.275 a gallon, while February heating oil tacked on 0.2% to $2.488 a gallon. February natural gas settled at $4.079 per million British thermal units, up 4.2%. Colder weather forecasts boosted heating demand expectations for mid-to-late January, said Christin Redmond, commodity analyst at Schneider Electric, in a Monday note.