Oil rose as investors weighed risks to the near-term outlook, including the impact of the omicron virus variant and upcoming OPEC+ meeting.
West Texas Intermediate was 1.2% higher, set for a back-to-back daily gain after plunging on Friday amid concern the new coronavirus variant would pummel energy demand. Drugmaker Pfizer Inc. said it will know within two to three weeks how well its existing vaccine holds up against the new strain.
Oil has sunk about 15% in November, set for the biggest monthly loss since March 2020, when the onset of the pandemic crushed global consumption. Investors are now seeking clues about the challenge posed by omicron, and how producers will respond. The Organization of Petroleum Exporting Countries and its allies will decide on Thursday whether to pause a run of monthly supply hikes.
“It’s probably too early to say with some conviction on where the market is headed next, until we have more data on the new variant,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore. If OPEC+ “do pause, it will provide another reason for oil to find a firmer footing,” he said.
Macro-economic data from Asia pointed to improvements in leading economies, a positive signal for energy demand. In China, the manufacturing purchasing managers index returned to expansion, while factory output in Japan edged up.
WTI for January delivery rose 1.2% to $70.79 a barrel on the New York Mercantile Exchange at 10:54 a.m. in Singapore.
Brent for January settlement climbed 0.9% to $74.10 a barrel on the ICE Futures Europe exchange.
Brent futures remain in backwardation, a bullish pattern marked by nearer-term prices trading above longer-dated ones, although the gap has been narrowing. The spread between the February and March contracts was 36 cents a barrel on Tuesday, down from 67 cents a week ago.
The Biden administration said on Monday that it would proceed with a plan to draw 50 million barrels of oil from strategic reserves despite the recent drop in prices, and it could release even more onto the market. The move was made in coordination with other crude-consuming nations, including Japan.
President Joe Biden cautioned Americans against panicking over the new variant and said lockdowns won’t be necessary. He said his administration doesn’t yet believe new vaccine formulations will be needed, but that it is already working with drug makers including Pfizer on contingency plans.
Oil traders are also tracking talks this week aimed at reviving Iran’s 2015 nuclear deal with world powers. Success at the negotiations in Vienna could lift sanctions from Iran’s economy, leading to a resumption in official oil flows. The exchanges began positively Monday, according to a top European diplomat.