Oil prices soar above $1/bbl. as Omicron terrors ease, Iran delay

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On Tuesday, oil prices extended their gains from the previous day, as concerns about the impact of the Omicron coronavirus variant on global fuel demand eased, while Iran nuclear talks stalled, delaying the return of Iranian crude.

Brent crude futures were up $1.12, or 1.5 percent, at $74.20 per barrel at 0720 GMT, after closing 4.6 percent higher on Monday. West Texas Intermediate crude in the United States was trading at $70.71 per barrel, up $1.22, or 1.8 percent, following a 4.9 percent gain the previous session.

Last week, oil prices plummeted on fears that vaccines against Omicron would be less effective, fueling fears that governments would re-impose restrictions to limit its spread, stifling global growth and oil demand.

“This lowers the probability of the worst case scenario that the oil markets have been pricing in over the past couple of weeks,” ANZ analysts said in a note.

Saudi Arabia, the world’s top exporter, raised monthly crude prices on Sunday in another sign of optimism about oil demand. This comes after the Organization of Petroleum Exporting Countries and its allies, known as OPEC+, agreed in January to maintain output increases of 400,000 barrels per day despite the release of US strategic petroleum reserves.

Crude imports in the world’s largest importer, China, also increased in November, according to poll, while US crude inventories are expected to fall for the second week in a row last week.

Furthermore, the delay in the return of Iranian oil aided prices. Nuclear talks between the United States and Iran have hit a snag. On Monday, Germany urged Iran to make realistic proposals in nuclear talks.

“While negotiations could still find success when they recommence later this week, markets may need to consider a more prolonged delay to Iranian oil exports,” Commonwealth Bank of Australia (OTC:CMWAY)’s commodity analyst Vivek Dhar said in a note.

“That’s positive for oil prices and supports OPEC+ plans to boost oil production through 2022.”

Story by : Norvisi Mawunyegah