Oil prices have continued on to recover from last month’s steep dive amid easing concerns over the Omicron variant.
Both major benchmarks are on course for their biggest weekly gains in over three months, with market sentiment less gloomy about the effect of Covid-19 on global growth and fuel demand.
The latest reports from medical authorities and countries facing the variant suggest it is largely mild and can be mitigated with booster shots of the vaccine.
Prices fell sharply in late November when the new variant first emerged – with both Brent and WTI crude plummeting over 10 percent, declining further into the mid-sixties doldrums at the start of the month.
This was a sharp contrast to the three-year highs of $86 per barrel only a month before, but the commodity has since regained about half its losses.
Brent is now trading at $75.14 per barrel – up 0.72 percent on the day – while WTI is selling at $71.68, a near-identical increase of 0.74 percent.
Nevertheless, headwinds remain which will keep a lid on prices and could even cause further shocks to the market.
Macro factors such as rising US inflation and flatlining air travel demand in China due to travel restrictions and weaker consumer confidence have already been priced in.
Newer developments could also cause issues for both benchmark, such as the UK introducing ‘Plan B’ restrictions this week including advice to work from home.
It is not the only European economy entertaining restrictions, with Czech Republic, Italy and Austria having previously introduced new measures in the past month.
If this is replicated across the continent – this could affect demand even with encouraging reports on the variant.
In more encouraging news for oil investors, US President Joe Biden is not considering a ban on exports to head off rising gas prices, while the timeline for his announced plans to flood the market with strategic reserves also has not been finalised.
By City AM
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