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U.S. oil futures settled higher Thursday as fading concerns about the impact on the economy from the omicron variant of the coronavirus and signs of falling inventories helped to support year-end buying.
“We’ve got oil prices showing some real strength into the end of the year and part of that is easing omicron fear and part of that is falling U.S. inventories,” said Matt Smith, analyst at commodity focused data and analytics firm Kplr, in a phone interview.
Markets had been soft to start the session as S&P Global Platts, citing refining sources, said that China’s Ministry of Commerce has issued 107.4 million metric tons in crude import quotas, falling 9.4% from the same batch in 2021.
However, dwindling concerns about omicron, given evidence that it is less severe than other variants, has bolstered the outlook for demand, Smith said. The analyst said that positive momentum in assets perceived as risky also was sweeping up oil futures along with stocks on Wall Street.
Upbeat economic reports also provided support for energy bulls, as the U.S. Labor Department data on Thursday showed that 198,000 applied for unemployment benefits during the week ended Dec. 25, leaving new jobless claims around a 52-year low amid the spread of omicron.
Separately, the Chicago Business Barometer, also known as the Chicago PMI, rose to 63.1 in December up from 61.8 last month, with the report viewed as an early gauge of the Institute for Supply Management’s more closely followed report on manufacturing activity next Tuesday.
West Texas Intermediate crude for February delivery
CLG22,
CL00,
traded 43 cents, or 0.6%, higher to settle at $76.99 a barrel on the New York Mercantile Exchange, after the U.S. benchmark rose 0.8% on Wednesday. The contract has posted seven straight gains, marking the longest such advance since the eight-session period ended Feb. 10, according to Dow Jones Market Data.
February Brent crude
BRNG22,
added 9 cents, or 0.1%, to finish at $79.32 a barrel on ICE Futures Europe, after rising 0.4% to the highest price since Nov. 25 for the global benchmark. Brent has climbed for four straight sessions.
Both contracts had pared early, modest losses to pivot higher in the middle of the session.
U.S. Energy Information Administration data on Wednesday showed crude oil inventories fell by 3.6 million barrels in the week to Dec. 24. Gasoline and distillate inventories also declined, indicating demand remained strong despite record U.S. COVID-19 cases.
Global oil prices have rebounded by between 50% and 60% in 2021 as fuel demand recovered to near pre-pandemic levels and output management by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) for most of the year erased a supply glut.
OPEC+ will meet on Jan. 4 to decide whether to continue increasing output in February and the early speculation is that the organization will stand pat on its plan to raise overall monthly production by 400,000 per day starting in January.
In other energy assets natural-gas futures were under pressure, down around 7% after EIA data.
The EIA reported that domestic supplies of natural gas fell by 136 billion cubic feet for the week ended Dec. 24. That is more than the 127 bcf average decline forecast by analysts polled by S&P Global Platts. The weekly drawdown also is greater than the five-year average draw of 121 bcf, S&P Global said. Total stocks now stand at 3.226 trillion cubic feet, down 256 billion cubic feet from a year ago but 19 billion cubic feet above the five-year average, the government said.
February natural gas futures
NGG22,
the most-active contract, lost 28.9 cents, or 7.5%, to settle at $3.561 per million British thermal units. Futures saw the biggest daily drop since Dec. 6 and marked a third straight drop, dragging the contract to the lowest values since June 25.
Contributing to the slump for natural-gas futures was a negative five-year outlook from S&P Global Platts, which indicated that “price risks will skew bearish post the winter considering US demand growth—including exports,” which the data provider wrote in a recent report is likely to begin to “appreciably slow over the next five years as structural gas burn losses in the power sector widen and overwhelm other demand gains.”
Meanwhile, January heating oil HOF22 gained 1.1 cent, or 0.8%, to end at $2.3959 per gallon, marking the highest price since Nov. 16. The January contract expires at the end of the week.
January gasoline futures RBF22 picked up 2.51 cents, or 1.1%, to reach $2.2968 per gallon. Gasoline’s January contract also expires at the conclusion of trading on Friday. Gasoline has seen seven straight gains which represent the longest win streak since Oct. 18, which has helped to push the commodity to the highest price since Nov. 24.
