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Volatile action continued for crude oil on Wednesday, with prices swinging higher on the heels of a sharp selloff, and the worst month of trading since March 2020 due to renewed COVID-19 worries.
West Texas Intermediate crude for January delivery
CL00,
CLF22,
climbed $3, or 4.5%, to $69.18 a barrel. The contract slumped $3.77, or 5.4%, to settle at $66.18 a barrel on the New York Mercantile on Tuesday.
November marked the biggest monthly declines for front-month WTI — down 21% — and Brent crude — off 16% — since March 2020, the start of the COVID-19 pandemic as per the World Health Organization. The following month, WTI crashed below zero dollars a barrel.
February Brent crude
BRN00,
BRNG22,
climbed $3.24, or 4.7%, to $72.47 a barrel. That followed a loss of nearly 5.5% to $69.23 a barrel for the global benchmark on Tuesday.
Attention Wednesday was on this week’s meeting of OPEC+ — made up of the Organization of the Petroleum Exporting Countries and its allies, including Russia. Technical meetings were slated for Wednesday, followed by a meeting of OPEC+ ministers on Thursday.
Some believe worries about how the variant will affect travel and activity could pressure OPEC+ to pause monthly increases in oil production that would have lifted output by another 400,000 barrels a day in January.
“The last thing OPEC would want to do is add more fuel — for the lack of a better word – to the fire. They are widely expected to pause plans for additional output increases starting from January,” said Fawad Razaqzada, market analyst at ThinkMarkets, in a note.
See: OPEC+ at a crossroads as oil prices post worst monthly drop since the pandemic began
“Opportunistic bulls are undoubtedly taking advantage of the downbeat prices, while bearish oil speculators wouldn’t want to run the risk of seeing another price spike and are buying back their presumably profitable short positions, thus fueling the kickback rally even more,” he said.
Along with other global assets, the commodity has been on a roller coaster since Friday’s announcement of the new omicron variant of coronavirus by South African scientists. Oil slumped Friday, rebounded Monday, then fell again on Tuesday after Moderna
MRNA,
CEO Stéphane Bancel cast doubt on the ability of current vaccines to fight the new variant.
Read: U.S. expected to toughen COVID testing requirement for international travelers
Oil fell along with other assets on Tuesday after Federal Reserve Chairman Jerome Powell said it makes sense for the central bank to speed up the taper of asset purchases, in testimony in front of the Senate Banking Committee.
Also a factor for oil, prices began rising late Tuesday after the American Petroleum Institute reportedly showed on Tuesday that U.S. crude supplies fell by 747,000 barrels for the week ended Nov. 26, along with weekly inventory increases of 2.2 million barrels for gasoline and 800,000 barrels for distillates.
Inventory data from the Energy Information Administration will be released Wednesday, with an S&P Global Platts survey of analysts forecasting a drop in crude inventories of 2.7 million barrels.
Weighing in on recent price action, Goldman Sachs strategists said in a note Tuesday that the selloff has “far overshot” any likely impact of the new variant on demand.
Elsewhere, January gasoline
RBF22,
rose 4.4% to $2.025 a gallon, after the now-expired December contract slid 4.7% to $1.98 a gallon, ending almost 20% lower for the month. January heating oil
HOF22,
rose 4.3% to $2.149 a gallon, after the now-expired December contract slid 4.1% to $2.064 a gallon, for a monthly decline of over 17%.
January natural gas
NGF22,
bucked a higher trend for energy contracts, falling 2.6% to $4.447 per million British thermal units. The contract slid 5.9% Tuesday, and lost 16% for the month.
