Oil prices rose after traders evaluated the outlook for demand in light of the rapid spread of omicron.
London futures rose above $72 per barrel on Tuesday in volatile trading after falling about 5% in the previous two days. The new virus variant caused 73% of all Covid-19-related infections in the U.S. but traffic in Europe was stable over the same time period, which suggests that there has been a limited demand impact.
Crude’s gains were made against the backdrop of rising gas prices and high power prices in Europe. France even used fuel oil to keep the lights on. Expectations of a shift in power consumption to crude oil earlier in the year gave rise to oil prices. On Tuesday, natural gas prices in Europe were at $300 per barrel.
Oil has still fallen towards the end of the year due to the advent of the Covid-19 strain before winter. The market structure for oil is showing bearish signs. This could indicate a near-term excess of supply. OPEC+ may need to take action when they meet next month.
“A relief bounce will not drive a major turnaround of sentiment with the Brent prompt spread signalling an oversupplied market,” said Ole Hansen (head of commodities strategy, Saxo Bank A/S).
- Brent for February Settlement climbed 1.5% at $72.59 per barrel at 12:11 London Time
- West Texas Intermediate rose 1.7% to $69.80 per barrel for February delivery
Monday’s financial market turmoil was further exacerbated by Senator Joe Manchin rejecting President Joe Biden’s approximately $2 trillion packages. According to a source familiar with the matter, the White House believed that Manchin had spoken to the president on Sunday. This conversation left open the possibility of reviving talks on the spending plan.
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