U.S. crude oil futures Tuesday were climbing to levels not seen since late November, after four straight days of gains of more than 1%, the biggest streak since late May of 2020, according to Dow Jones Market Data, as winter demand, and hopes that the omicron variant of coronavirus would have only limited impact on economic growth, justified buying.
However, low trading volumes amid the Christmas and New Year holiday may be amplifying volatility, analysts said.
The rise in crude prices also gained some support after the U.K. said that it would not impose any further restrictions on consumer mobility as COVID infections rise in the region, though it was reviewing the impact of the disease on hospitals.
Holiday travel has been impeded by flight cancellations resulting from COVID-related staff shortages around the globe, but the U.S. Centers for Disease Control and Prevention has reduced the recommended isolation period for people infected with COVID-19 to 5 days from 10 as recent preliminary studies have suggested the omicron variant may be more transmissible but less severe than other COVID strains.
West Texas Intermediate crude for February delivery CLG22, +1.55% CL.1, +1.55% was trading $ 1.16 higher, or 1.6%, to reach $ 76.75 a barrel on the New York Mercantile Exchange, after the U.S. benchmark rose 2.4% on Monday.
“Crude oil prices are up over a full point with spot oil nearing $ 77, and could very well reach our short-term target of $ 80 as the ‘fear factor’ over demand subsides,” wrote Peter Cardillo, chief market economist at Spartan Capital Securities, in a daily note.
February Brent crude BRNG22, +1.31%, the global benchmark, advanced $ 1.18, or 1.5%, to trade at $ 79.40 a barrel on ICE Futures Europe, following a 3.2% gain a day ago.
However, some economists see the spread of the virus as a hurdle for global economic growth. Mark Zandi, chief economist at Moody’s Analytics, downgraded his first-quarter U.S. gross domestic product forecast to 2.2% growth from 5.2% as he “can see the economic damage mounting going into the first quarter,” The Wall Street Journal reported. A weaker economy could be a drag for oil uptake.
Looking ahead, investors are watching for a meeting between the Organization of the Petroleum Exporting Countries and its allies, including Russia, a group known as OPEC+, which is scheduled for Jan. 4.
OPEC+ will assess its plans to boost daily oil production among its members to 400,000 bpd starting in February or adjust its output to factor the spread of COVID.