Oil pieces have climbed after a decrease in U.S. crude stockpiles and higher equities pushed by economic data.
Last week, the Energy Information Administration reported crude inventories have declined 4.72 million barrels. Rising home sales and consumer confidence have also sent positive signals to counter any worries about Omicron.
“The report was modestly bullish, due to the large crude oil inventory drawdown,” said John Kilduff, a partner at Again Capital LLC. However, he pointed out that crude oil inventories usually fall around this time of the year for tax avoidance purposes.
Yet, the outlook is mixed on the consumption side. Gasoline stockpiles in the U.S. climbed as implied demand plunged nearly half a million barrels a day last week. The city of Xi’an in China is also tightening its rules to curb an outbreak, according to local media. But otherwise, the impact of Omicron on global demand has been limited so far.
An energy crunch in Europe and disruptions to supply from Libya and Nigeria have added to bullish sentiment. Weakness in the dollar also have propped up oil, as a weaker greenback makes oil less expensive for holders of other currencies.
“Holidays can be treacherous in the market,” said Phil Flynn, senior market analyst for Price Futures Group. “We have seen crazy moves on light volume.”
Flynn added that in the short-term, geopolitical issues could provide some support to a rally in oil, most notably from tensions in Europe in response to Russia’s natural gas deliveries.