Oil loses ground as Omicron mutes demand

Melbourne — Oil prices slipped on Thursday, trimming big gains from the previous two sessions, amid uncertainty over near-term demand as cases of the highly contagious Omicron variant of the coronavirus surge around the globe.

US West Texas Intermediate (WTI) crude futures slipped 7 US cents, or 0.1%, to $82.57 a barrel at 2.21am GMT, after climbing 1.7% in the previous session.

Brent crude futures shed 6 US cents, or 0.1%, to $84.61 a barrel, after rising 1.3% on Wednesday.

Data from the US Energy Information Administration (EIA) on Wednesday showed fuel demand has taken a hit from Omicron, with petrol stockpiles increasing by 8-million barrels in the week to January 7, compared with analyst expectations for a 2.4-million-barrel rise.

“Gasoline [petrol] demand was weaker than expected and still below pre-pandemic levels, and if this becomes a trend, oil won’t be able to continue to push higher,” Oanda analyst Edward Moya said in a note.

However, Moya added, the Omicron effect is expected to be short-lived.

Earlier, the market had latched on to a bigger drawdown than expected in crude inventories and the fact that stockpiles are at their lowest since October 2018.

“In reality, the weekly EIA report was less bullish than the headline number, as total crude oil inventories fell 4.8-million barrels but were more than offset by a stock build across refined products,” Citi said in a note.

ANZ Research pointed to commercial flight numbers running at 16% below 2019 levels for the week to January 11. That was at least better than in the last week of December, when numbers were down 20% on pre-pandemic levels, according to FlightRadar 24.

Reuters