Oil prices catch their breath amid omicron concerns

London — Oil prices steadied on Tuesday after a sharp fall in the previous session as investors worried about the rapid spread of the omicron coronavirus variant and the effect of renewed restrictions on fuel demand.

Brent crude was down 8 US cents, or 0.1%, at $71.44 a barrel by 9.03am GMT, while US West Texas Intermediate (WTI) crude rose 5 US cents, or 0.1%, to $68.66 a barrel.

Both contracts rose almost $1 earlier in the session.

“This is a pragmatic market that wants to be bullish but knows relief rallies, like the one this morning, will not last,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.

“The upside is likely to be limited and more restrictions will be greeted with renewed selling,” he added.

New Zealand delayed the planned reopening of its international border because of the sweeping spread of omicron around the world on Tuesday, as several other countries reimposed social distancing measures.

Many nations are on high alert just days ahead of Christmas and New Year celebrations, with omicron infections multiplying rapidly across Europe, the US and Asia, including in Japan where a single cluster at a military base has grown to at least 180 cases.

Still, Moderna said on Monday that a booster dose of its Covid-19 vaccine appeared to be protective against the fast-spreading omicron variant in laboratory testing, providing some hope to investors.

On the supply front, Opec+ compliance with oil production cuts rose to 117% in November from 116% a month earlier, two sources from the group told Reuters, indicating production levels remain well below agreed targets. Opec+ is a grouping of producers comprising oil cartel Opec and its allies, including Russia. 

In the US, crude oil inventories were expected to have fallen for a fourth consecutive week, while distillate and petrol stockpiles likely rose last week, a preliminary Reuters poll showed on Monday.

The poll was conducted ahead of reports from the American Petroleum Institute, an industry group, due on Tuesday, and the Energy Information Administration, the statistical arm of the US department of energy, due on Wednesday. 

Reuters