Oil rose as investors evaluated an increase in Omicron cases against indications that the new strain is not as severe as earlier rounds.
Brent was 0.39 percent higher at 9.40 a.m. UAE time, after falling 0.9% the previous session. West Texas Intermediate lost 0.69 percent despite the fact that it did not trade on Friday owing to a US holiday. The number of daily infections in the United States with the new strain has already overtaken that of the Delta wave, while China has reported the largest number of cases since January.
Nonetheless, Brent’s near-term market structure indicated an improving prognosis.
Traders were also keeping a close eye on a scheduled 100,000 kilolitre crude sale from Japan’s strategic reserves. According to a commerce ministry official, the action is part of Tokyo’s ambitions to sell oil in collaboration with other oil-consuming countries, and further sales may follow as energy markets are watched.
Crude’s recovery from the depths of the epidemic has encountered significant obstacles in recent months, as investors assessed the threat to demand presented by Omicron. At the same time, Opec has continued to increase supply, while the United States has spearheaded the coordinated release of oil from national strategic reserves.
Airlines have begun canceling certain services owing to personnel shortages as a result of Omicron, endangering a nascent recovery in jet fuel use. President Joe Biden’s top medical advisor, Anthony Fauci, said Americans should be watchful against the new strain, despite indications that its symptoms are less severe, because the amount of cases continues to overwhelm hospitals.
“Even if Omicron is less virulent, its contagiousness looks to have the ability to impede the flow of goods and services as employees isolate,” said Jeffrey Halley, senior market analyst at Oanda Asia Pacific. According to him, this would mean reduced levels of oil usage.
Brent’s prompt timespread – the difference between the nearest contract and the next in sequence – has recently rebounded to a bullish pattern after momentarily reverting to a negative contango structure. On Monday, the spread was 41 cents a barrel in backwardation, up from 5 cents in contango a week earlier.
Meanwhile, traders will be keeping an eye on negotiations scheduled for later on Monday over a possible restoration of Iran’s nuclear agreement, which may pave the way for a restart of official crude flows. The EU has stated that negotiators must expedite efforts to settle an impasse between Tehran and Washington.