(Bloomberg) Oil headed for its biggest weekly gain in more than three months after the deepest fears over the new virus strain receded, though traders remained on edge over the demand outlook. West Texas Intermediate futures have climbed 7.4% this week, as fuel consumption has so far escaped a major blow from the omicron variant. Yet the mood remained fragile after a sell-off on Thursday amid rising infections and renewed restrictions by some governments to contain the spread.
“The oil market has thus rightly priced out the “worst case scenario” again, but it would be well advised to leave a certain residual risk to oil demand in place,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “The upside potential is dwindling.”
Crude has seen a remarkable turnaround after oil tumbled into a bear market on Nov. 30, following a multi-week plunge. But concerns persist over the omicron variant, which one study indicates is 4.2 more times transmissible than the delta version in its early stages.
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Many parts of the eastern U.S., including New Jersey and Connecticut, are seeing a rise in hospitalizations. The City of London could also be about to become a ghost town again after firms started telling thousands of staff to work from home in response to the latest U.K. government guidance.
There are other bearish signs mounting. Traders are facing the prospect of a weakening physical market for crude in Asia, despite Saudi Arabia’s move to increase oil prices for January. The prompt timespread for global benchmark Brent has also narrowed and is inching toward a bearish contango structure — where near-dated contracts are cheaper than later ones.
See also: Oil’s Omicron Optimism Isn’t Showing Up in Key Spread: Chart
Prices
West Texas Intermediate for January rose 0.3% to $71.17 a barrel on the New York Mercantile Exchange at 10:19 a.m. in London.
Brent for February settlement gained 0.2% to $74.54 on the ICE Futures Europe exchange after sliding 1.9% on Thursday.
The prompt timespread for Brent was 20 cents in backwardation, compared with $1.34 at the start of last month.
Other oil-market news:
Global oil demand will grow next year even as the world continues to grapple with new variants of the coronavirus, according to S&P Global Platts Analytics.
The Biden administration shouldn’t ban the export of crude oil, a bipartisan group of House lawmakers said in a letter.
A China court has upheld an arbitration ruling in Singapore forcing China Wanda Group Co. to repay Macquarie Group Ltd. 383 million yuan ($60 million) as part of a crude oil trading dispute.
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