The EIA data released Wednesday showed “blockbuster demand for products…and a big drawdown on crude supply, suggesting that the omicron fears that have permeated the marketplace since Thanksgiving Day have been way overstated,” said Phil Flynn, senior market analyst at The Price Futures Group, in a daily report. On top of that, oil is rallying on the fact that Wednesday’s Federal Reserve announcement is “now behind us and even though the Fed was hawkish, the reality is that they had signaled that they would be and despite what you read, the hawkishness was not as bad as expected,” said Flynn.

The U.S. central bank said it will phase out its bond-buying stimulus program by March, much faster than previously planned, and signaled it would raise interest rates more aggressively to combat high U.S. inflation. Oil prices, as well as U.S. equities, rose in the aftermath of the announcement. The mood of the market has “shifted because of clarity” from Fed, Flynn told MarketWatch on Thursday afternoon. “Now we know where the Fed stands and that rates aren’t going to rise tomorrow.”

Oil traders also seem “less concerned” about potential omicron-related restrictions in Europe, he said. And tensions between Russia and Ukraine are also supportive for oil, as that raises the potential for sanctions on Russia that could disrupt its energy sector, he added. Ukraine has called on the European Union to prepare sanctions against Russia to use if Moscow steps up its military aggression, CNB reported Thursday.

West Texas Intermediate crude for January delivery rose $1.51, or 2.1%, to settle at $72.38 a barrel on the New York Mercantile Exchange, the highest finish for a front-month contract since Nov. 24, according to Dow Jones Market Data. February Brent crude, the global benchmark, added $1.14, or 1.5%, at $75.02 a barrel on ICE Futures Europe. “The fact that the financial market environment is generally somewhat less risk-averse lent buoyancy on the one hand: with its accelerated exit from its ultra-expansionary monetary policy, the Fed is apparently giving the impression that everything is under control,” wrote analysts at Commerzbank, in a note.

Meanwhile, the EIA on Wednesday said U.S. crude inventories posted a decline of 4.6 million barrels for the week ended Dec. 10 — the biggest weekly fall since September. “Besides high U.S. exports, this was chiefly due to robust U.S. demand: U.S. gasoline demand increased to 9.5 million barrels per day, thereby exceeding its pre-pandemic level from December 2019. And daily demand for distillates even surged by more than 1.3 million barrels week-on-week to 4.9 million barrels,” the Commerzbank analysts noted.

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Energy prices have moved up “off chatter that the omicron virus might not present severe health problems,” analysts at Zaner wrote in Monday’s commentary. Recent reports have offered some cause for optimism about the new strain’s potential impact on the economy. The U.S.’s top medical adviser Anthony Fauci said that omicron didn’t appear to produce a “great deal of severity” in cases, aligning with some early research that indicates that infections tend to be milder compared against other variants.

Meanwhile, Saudi Arabia increased its prices of Arab Light oil over the weekend for January delivery that it sells to Asia and U.S. by up to a two-year high, according to Reuters. The decision by the Saudis, the de facto head of the Organization of the Petroleum Exporting Countries and one of the biggest oil producers in the world, to hike the cost of the oil to the U.S. and Asia “comes amidst expectations that demand will remain high in the new year,” wrote Ricardo Evangelista, senior analyst at ActivTrades, in a daily research note. That, together with reports of an impasse in the talks between the U.S. and Iran, is supporting the price of the barrel,” he said.

Against that backdrop, West Texas Intermediate crude for January delivery $3.23, or 4.9%, to settle at $69.49 a barrel on the New York Mercantile Exchange, after the U.S. benchmark produced a weekly loss of 2.8% on Friday. Prices on Monday ended the session at their highest in a week, according to Dow Jones Market Data. In electronic trading after the settlement, the front-month WTI contract touched highs above $70.

Tensions in the Middle East likely contributed to the rise. Saudi state TV reported that a ballistic missile was launched toward the Saudi Arabian capital of Riyadh Monday, according to The Jerusalem Post. “Rising geopolitical risks” added to oil’s move higher, with the news of that the Saudis intercepted the missile, and there have been recent reports that Russia deployed troops along its border with Ukraine, raising the possibility of a military invasion, Phil Flynn, senior market analyst at The Price Futures Group, told Market Watch. But all in all, “the market is getting the sense that the worst could be over with the virus and there’s more optimism that the sell off was way overdone,” he said.

February Brent crude, the global benchmark, rose $3.20, or 4.6%, to settle at $73.80 a barrel on ICE Futures Europe, the highest finish since Nov. 29. Prices last week lost 2.4%, based on the front-month contract. Last week, both WTI and Brent notched six straight weekly declines, marking the longest such streak since 2018. Monday’s action “comes on the back of last week’s decision by the OPEC+ cartel to maintain the increases in production for January, despite uncertainty over demand due to the emergence of the omicron variant,” said Evangelista. Oil values have seen some stabilization as OPEC and its allies, a group known as OPEC+, last Thursday, displayed some confidence in the prospects for crude uptake, agreeing to rollover a current production policy and raise monthly overall output by 400,000 barrels per day in January, while deciding not to adjourn a key meeting to allow for further shifts in policy if needed. “However, today’s gains should not be interpreted as the beginning of a rally in prices, as uncertainty over the impact of the new virus variant on economic activity will cap the scope for further rises,” said Evangelista.