(Bloomberg) — Oil steadied as investors weighed mixed demand signals and trading volumes thinned moving into the holiday period.
Futures in New York traded near $71 a barrel after rallying on Tuesday with other financial assets. An energy crunch in Europe and an industry report that pointed to another decrease in U.S. crude stockpiles added to bullish sentiment for oil. However, the omicron variant of the coronavirus has continued to hang over the market, despite not having a big impact on consumption so far.
“The ebb and flow of omicron fears will continue to buffet crude, with thinner trading activity over the year-end amplifying volatility,” said Vandana Hari, the founder of Vanda Insights in Singapore. “Day-on-day price swings of 2%-to-4% may remain the norm this week and the next.”
Oil is poised to cap a yearly gain following a rebound from the pandemic, but the rally has faltered over the past couple of months in part due to demand concerns after the emergence of omicron. There are some signs of softening consumption in Asia and crude market’s structure has weakened significantly, indicating over-supply in the near term.
Europe’s energy crunch, meanwhile, has raised the prospect of greater demand for oil products in power generation. Natural gas prices surged after Russia curbed flows, forcing France to boost electricity imports and burn oil to keep the lights on. U.S. Gulf Coast refiners have also trimmed diesel shipments to Europe to prioritize domestic demand and buyers in Latin America.
The American Petroleum Institute reported U.S. crude stockpiles declined by 3.67 million barrels last week, according to people familiar with the figures. If confirmed by government data later on Wednesday, it would be a fourth weekly draw. The Energy Information Administration is expected to report nationwide crude stockpiles fell by 2.5 million barrels, according to a Bloomberg survey.
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