Oil partially recovered on Monday morning from last month’s heavy setbacks, climbing towards $72 a barrel amid near two per cent rises on both major benchmarks.
The rebound was powered by growing hopes the Omicron variant is milder than first feared, alongside receding prospects of Iran boosting its exports next year.
Brent Crude has breached $70 a barrel following numerous set backs last month, reaching $71.78 per barrel on Monday morning in a near two per cent recovery.
WTI Crude also rose to $68.17 – enjoying a 1.91 per cent rise.
The news will encourage investors – following six successive weeks of benchmark declines.
Oil prices fell by over 10 per cent on both benchmarks on November 26 following the emergence of the new Covid variant and concerns over its affect on air travel demand and consumptions.
However, reports on the severity of the Omicron variant have been relatively encouraging so far – with US chief medical advisor Dr Anthony Fauci suggesting the data does not indicate it is more dangerous than previous Covid-19 strains.
The World Health Organization has also stated there is no current evidence that symptoms of Omicron are different to those of other variants.
In the UK, there has been a 50 per cent day-by-day increase in Omicron cases – with further 86 cases reported on Monday morning, taking the domestic total to 246.
There have been mixed reports on the potential effect of the variant across the country.
Former vaccine taskforce chief Clive Dix argues that the new variant could be a ‘storm in a teacup’ that could blow over this month.
By contrast, leading statistician Sir Professor David Spieleghalter of Cambridge Univesity fears the need for more restrictions this winter to reduce the spread.
The UK is continuing its third dose and booster campaign – with 20m jabs rolled out over the past three months.
Investec’s head of commodities Callum Macpherson told City A.M. that $65 per barrel appears to be the floor in prices – unless the variant is discovered to be more deadly than first reported.
He said: “The low in Brent last week was 65.72 $/b. This occurred during the OPEC+ meeting and is not far off the August low of 64.60 $/b. This suggests that 65 $/b area is a key support level. Perhaps we would need to see some clear bad data on Omicron to test that level. There is equally the possibility of a return to the short term supply worries of a month ago if Omicron does not cause disruption to demand.”
Macpherson argued both benchmarks had already shown signs of recovery amid reports of the the variant’s potential mildness.
He explained: “In that case, we may see Brent being able to build a base from the 65 to 70 $/b range we saw last week. The price has certainly been helped in recent days by comments from the BioNTech founder, the WHO and some national medical officials, providing a more positive view than comments from the Moderna chief that spooked markets last week.”
The price recovery also follows Saudi Arabia raising January selling prices for all crude grades to Asia and the US by 80 cents from the previous month.
Oil was also buoyed by diminishing prospects of a rise in Iranian oil exports, as US-Iran talks on saving the 2015 Iran nuclear deal lost momentum last week.
Nevertheless potential headwinds remain in the market alongside the changing nature of Covid variant developments.
OPEC and its allies including Russia (OPEC+) decided to continue increasing monthly supply by 400,000 barrels per day from January – despite fears of a surplus, while the US remains committed to releasing strategic reserves, even if it could adjust the timeframe to manage drops in prices.