Oil prices were slightly higher early on Friday, headed for the fourth consecutive week of gains, which would be the longest weekly gains streak since October, before the Omicron variant scare emerged.
As of 9:17 a.m. EST on Friday, WTI Crude was up 0.35% at $82.41 and Brent Crude traded 0.58% higher at $84.95, as the U.S. dollar was falling and on course to post its biggest weekly drop in over a year.
The weaker dollar propped up the crude complex on Friday as it makes the dollar-priced commodities cheaper for holders of other currencies. Still, the market has been in a bullish sentiment since the start of the year, as traders and speculators expect the Omicron COVID variant to have a mild impact on economies, despite the record cases reported in many countries.
After the initial Omicron scare and sell-offs at the end of November and early December, the market has taken comfort in estimates that the latest fast-spreading variant will not affect global oil demand as much as feared a month and a half ago.
Even the International Energy Agency (IEA) sees milder-than-expected demand disruption. Global oil demand has proven to be more resilient to the effects of the Omicron variant's spread than the IEA expected, Executive Director Fatih Birol said earlier this week.
On the supply side, the market seems to be increasingly convinced that the OPEC+ group will continue to undershoot-by a lot-its oil production target in the coming months. This gives bulls hope that the expected oversupply as early as this quarter will not be as large as initially forecast.
As OPEC+ eases the cuts, shrinking global spare capacity, mostly concentrated in the large Middle Eastern producers, could also be a very bullish factor for the oil market going forward.
"The rising gap between OPEC+ crude oil quotas and actual production has already been felt in the market with front month futures prices in both WTI and Brent having rallied stronger than later-expiring contracts. The spread or so-called backwardation between the first and the second Brent futures contract has risen from a low point at 20 cents a barrel in early December, when Omicron worries sparked a sharp correction, to 70 cents a barrel currently," Ole Hansen, Head of Commodity Strategy at Saxo Bank, said on Friday.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More