Crude oil prices near $84/barrel as Omicron impact expected to be short-lived

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On Tuesday, both US WTI (West Texas Intermediate) and UK crude oil futures’ prices had jumped more than 3 per cent with both benchmarks climbing to their highest since mid-November, mostly driven by squeezed supplies alongside anticipations that fiscal fallouts of the rapidly rising Omicron cases would be short-lived.

In point of fact, remarks from US Fed Chair Jerome Powell in a congressional hearing on Tuesday, had tuned up tone of Tuesday’s rally for crude oil futures, as Fed’s Powell was quoted saying that the impacts of Omicron would be short-lived and growth outlook remained highly positive, eventually leading to investors’ optimism over a demand-surge once the Omicron subsides.

In the US, Omicron would likely to peak by late-January, while in the Western Europe, Omicron cases would likely to infect about 50 per cent population in less than a month with symptoms lasting between 5 to 7 days and requiring low hospital admission, suggested health officials.

Besides, Omicron had an incubation period of 1 to 3 days, much lower than delta or ‘Wuhan’ variant which had reported incubation periods between 14 to 37 days. Apart from that, the US Government said on its first oil output forecast in 2022, that, US crude production was expected to rise by 610,000 bpd (barrels per day) to 12.41 million bpd in 2023, suggesting a better demand landscape.

Concomitantly, analysts were expecting US crude inventories to decline for a seventh straight week, adding further impetus on investors’ optimism, however, an increase in Libyan output alongside a successful peacekeeping mission from Kremlin in Kazakh, had pared some of the gains.

Crude oil gains as US Fed’s Powell says Omicron impacts will be short-lived

Citing statistics, in the day’s commodity market wind-down, UK crude climbed 3.35 per cent to $83.59 per barrel, hitting the highest since early November, while US WTI crude oil contracts’ prices leapt 3.7 per cent to settle down at $81.11 a barrel, remarking the strongest since mid-November.

Meanwhile, addressing to a strong demand-surge along with a low output from Opec+ nations, a senior analyst at Price Future Group, Phil Flynn said, “Combination of facts - that demand is going to be stronger than anticipated and that OPEC's supply may not grow as fast as the demand - is why prices are climbing”.