Oil holds near $80 a barrel as Omicron fears begin to ease

Oil held near a one-month high after industry data pointed to another drop in U.S. crude inventories and traders bet the fast-spreading omicron virus variant would prove to be less severe than earlier waves.

Brent for February settlement gained 0.1% to $79.03 a barrel on the ICE Futures Europe exchange. West Texas Intermediate is steady near $76 a barrel after gaining 11% over the last five sessions.

The American Petroleum Institute reported nationwide crude holdings fell by 3.1 million barrels last week, according to people familiar with the data, which also showed a rise at Cushing, the biggest U.S. storage hub. The government releases the official tally later on Wednesday.

Oil’s recovery has also been supported as the Organization of Petroleum Exporting Countries and allies including Russia took a cautious approach to restoring output.

The group is due to meet next week to assess policy heading into 2022. Ahead of that, Russian Deputy Prime Minister Alexander Novak said that the country was comfortable with prices between $65 and $80.

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Investors’ worries about omicron are easing on growing evidence that the variant is milder in nature, potentially reducing the need to impose restrictions on movement. Still, global case numbers are soaring, increasing the strain on health-care systems in the major energy-consuming economies.

Crude is heading for its biggest annual gain in more than a decade as global consumption recovered from the impact of the pandemic with the roll-out of vaccines.

That’s helped to deplete once-bloated oil inventories, especially in the U.S. Should official data match the API print that would be a fifth consecutive weekly decline, the longest run of draws since September.

“It’s unusual to see this kind of volatility during the year-end holidays,” said John Driscoll, founder of JTD Energy Services Pte.

“The underlying sentiment may be driven by convictions that oil prices initially overreacted to omicron and that global demand is on track to recover next year,” Driscoll said.

Brent’s prompt timespread — the gap between the global benchmark’s two nearest contracts — remains in backwardation, a bullish pattern marked by near-term prices commanding a premium to those further out. It was 28 cents a barrel in backwardation, compared with 1 cent a week ago.