Oil futures were higher Tuesday, but remained off earlier highs, after the International Energy Agency said the omicron variant of the coronavirus that causes COVID-19 would slow a recovery in demand for crude.
West Texas Intermediate crude for January delivery CL00, -0.18% CLF22, -0.18% rose 9 cents, or 0.1%, to $ 71.38 a barrel on the New York Mercantile Exchange. February Brent crude BRN00, -0.20% BRNG22, -0.20%, the global benchmark, edged up 12 cents, or 0.2%, to $ 74.51 a barrel on ICE Futures Europe.
Both benchmarks dipped into negative territory after the Paris-based IEA, in its monthly report, cut its 2022 supply forecast from non-OPEC producers by 100,000 barrels a day and reduced its demand forecast by the same amount, saying it expects the surge in coronavirus cases to stymie the recovery in global demand.
Read: IEA cuts 2022 oil demand outlook citing omicron hit on global growth
Analysts said traders would remain attuned to reports around the severity of the omicron variant.
Central banks are also in focus, with the Federal Reserve expected to move Wednesday to more quickly wind-down its monthly asset purchases, setting the stage for rate increases by next spring.
See: 5 things to watch for when the Federal Reserve announces its policy decision Wednesday
“If risk appetite is given a boost by central banks this week we could see [oil] push on higher but ultimately, the omicron data is going to be key,” said Craig Erlam, analyst at Oanda, in a note. “Politicians are clearly concerned and the rate of transmission is worrying. Further restrictions could weigh but traders will be all too aware that any drop in the price on this could trigger a sudden adjustment from OPEC+.”