Oil Rebounds on OPEC, Only to Drop Back on 1st US Omicron Case

By Barani Krishnan

Investing.com - Oil prices recovered from 3-month lows on Wednesday in anticipation of supportive action from OPEC, before closing lower for a fifth time in six days after the United States announced its first Omicron case of Covid.

WTI, or the West Texas Intermediate benchmark for U.S. crude settled down 61 cents, or almost 1%, at $65.57 per barrel, after rebounding to $69.49 earlier in the session. WTI has lost almost 17% since its last positive close of $78.50 on Nov. 23. It is also down more than 23% from the seven-year high of $85.41 notched in mid-October.

London-traded Brent crude, the global benchmark for oil, settled down 36 cents, or 0.5%, at $68.87. Brent has lost 16% since its last positive close of $82.31 a week ago. It is also down 21% from its seven-year high of $86.70 attained in mid-October.

“I think the next immediate landing zone for WTI is $62,” said John Kilduff, founding partner at New York energy hedge fund Again Capital. “There’re still lots of moving parts to this Omicron thing, but I imagine that will be the first target for WTI before we try to take out $60.”

The US individual infected with the latest-discovered variant of Covid is a California resident who had traveled home from South Africa on Nov. 22, top U.S. virologist Dr. Anthony Fauci told a news conference. The person was fully vaccinated, has mild symptoms and is self-quarantining.

The news dragged down crude prices, already weighed by unsupportive weekly supply-demand inventory data released by the Energy Information Administration.

The 13-member OPEC, or Organization of the Petroleum Exporting Countries, led by Saudi Arabia met on Wednesday before a larger summit due on Thursday with 10 other oil producers steered by Russia. 

OPEC did not divulge any production plans on Wednesday, meaning that it could be up to the 23-nation OPEC+ alliance to decide how producers react to what could be the second biggest crisis in oil demand since the onset of the first Covid outbreak 20 months ago.

Ahead of its Thursday meeting, OPEC+ had prepared a document that showed the alliance forecasting the global oil surplus to grow to 2 million barrels per day in January, 3.4 million in February and 3.8 million in March, Reuters reported.

Crude prices also struggled to hold to the highs of the day after weekly inventory data showed crude inventories dropped by just 910,000 barrels last week, versus analysts' expectations for a draw of 1.237 million barrels.

Distillate stockpiles, which include diesel and heating oil, rose 2.16 million barrels in the week against expectations for a build of 462,000 barrels.

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