Oil prices remained stable on Thursday following multiple scientific reports from the UK seemingly confirming the Omicron variant is milder than previous Covid-19 variants.
There were growing fears the Omicron variant would significantly reduce air travel demand into the new year, but the latest news will encourage investors that any restrictions will be time-limited.
Brent Crude futures increased 0.92 per cent on Thursday, trading at $76.21 per barrel while WTI Crude has risen 0.8 per cent to $73.56.
Both benchmarks are set for a third straight day of gains after a five per cent drop on Monday.
So far this year, Brent Crude and WTI Crude have risen by 46 per cent and 50 per cent respectively – as the market recovers from the pandemic..
This follows reports from Imperial College London and Edinburgh University which suggest the Omicron variant is considerably less severe than the Delta variant.
On Thursday evening, the UK Health Security Agency published further research suggesting Omicron patients are 50-70 per cent less likely to need hospital treatment.
Meanwhile, AstraZeneca revealed that a three-dose course of its COVID-19 vaccine was effective against Omicron, citing data from an Oxford University study.
Speaking to Reuters, OANDA market analyst Jeffrey Halley said: “Oil’s direction is entirely reliant on Omicron headlines, and as long as they stay more contagious but less virulent, oil’s rally is likely to continue, with intra-day ranges exacerbated by thin liquidity.”
Downing Street is still considering whether to re-introduce new restrictions after Christmas in line with Scotland, Wales and Northern Ireland – but the latest findings will be good news for both the government and oil markets.
Nevertheless, oil markets will likely remain affected by reduced air travel demand over the short-term with major European economies such as Germany and France re-introducing travel restrictions and social distancing measures.
Netherlands has even re-entered lockdown this winter.
Alongside market reassurance about the new variant, big gains on Wednesday were partly spurred by a larger-than-expected drawdown in U.S. crude stockpiles last week
The markets are also benefitting from record power and gas prices, with buyers turning their attention to the comparatively cheaper oil – which remains well below its three-year-peak in October.
One of the major headwinds facing the oil market is the possibility of a spring surplus.
The Organization of the Petroleum Exporting Countries alongside its allies including Russia (OPEC +) and allies are set to review current plans to increase oil production to 400,000 barrels per day next year, in an upcoming meeting on January 4.