(Bloomberg) — Oil steadied near a four-week high as traders weighed falling U.S. crude stockpiles against the threat to demand from the omicron virus variant.
Futures in New York traded near $73 a barrel during the session, though liquidity is dwindling heading into the holiday period. U.S. crude inventories dropped by 4.72 million barrels last week, according to government data, almost twice the median estimate in a Bloomberg survey. That offset some concerns about the impact of omicron on global consumption.
“U.S. inventories remain very low,” said Scott Shelton, energy specialist at ICAP. “For those who are calling for builds in 2022, we had better start building or prices are going to $100-plus.”
Trading volumes are starting to thin before Christmas, while open interest — the total number of oil contracts held by traders — for crude, gasoline and diesel futures combined is at its lowest in almost six years. Both could leave the market prone to sharp moves amid thin liquidity.
Oil is heading for an annual gain following a strong rebound from the pandemic, but there are bearish headwinds mounting for the market, including the omicron strain. However, an energy crunch in Europe and disruptions to supply in Libya and Nigeria have led to some tightening.
The market is seeing “some sideways trading toward the holidays with liquidity drying up,” said Hans van Cleef, a senior energy economist at ABN Amro Bank NV. “The uncertainty regarding omicron and the impact of the larger number of lockdowns is negative for prices. However, the lower inventories faded that effect out.”
U.S. crude futures face some resistance in breaking above its 100-day moving average of $74.04 a barrel, but edging above that level could trigger further buying from speculators, analysts said.
Meanwhile, Exxon Mobil Corp. reported a fire at its Baytown oil-processing facility in Texas. The plant is one of the largest refineries in the U.S. and has a capacity of about 561,000 barrels a day, U.S. Energy Information Administration data show. Gasoline’s premium over crude surged as much as 6.1% after the news.
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