Oil slightly up over larger-than-expected inventory fall

IZMIR

Oil prices slightly increased on Thursday as US crude stocks fell more-than-expected, declining five weeks in a row, however the omicron variant continues to cause negative market sentiments in the coming year.

International benchmark Brent crude was trading at $79.24 per barrel at 0635GMT for a 0.03% increase after closing the previous session at $79.21 a barrel.

American benchmark West Texas Intermediate (WTI) was at $76.62 per barrel at the same time for a 0.07% gain after trade ended at $76.56 a barrel in the previous session.

The larger-than-expected drop in the US crude oil inventories relieved investor concerns, signaling a recovery in crude demand in the US and putting upward pressure on prices.

US commercial crude oil inventories decreased by 0.8% during the week ending Dec. 24, according to the latest data released by the Energy Information Administration (EIA).

Inventories fell by 3.6 million barrels to 420 million barrels, exceeding the market expectation of a 3.2 million-barrel drop.

Gasoline inventories also decreased by 1.5 million barrels to 222.7 million barrels over that period.

However, the upward trend in the prices were limited due to the rapid spread of omicron globally, creating negative market sentiment on global economies and oil demand, as more countries consider imposing restrictions.

Britain reported 183,037 cases of COVID-19 on Wednesday, setting a new record for daily infections.

World Health Organization (WHO) Director-General Tedros Ghebreyesus also said that the fast-moving omicron variant of COVID-19 is triggering a “tsunami of cases,” leaving health systems near collapse, exhausting health workers, and disrupting the goal of halting the pandemic’s acute phase in 2022.

Karl Lauterbach, Germany's health minister, also warned that people should prepare for a significant surge in coronavirus infections within a few weeks.

“The actual number of daily new cases are likely to be two to three times higher than the reported during the holiday period. Furthermore, we’re witnessing a significant increase in omicron infections. This worries us,” he told a news conference in Berlin.

Investors are now monitoring the upcoming meeting of the Organization of Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, on Jan. 4. The group will decide whether to increase output by 400,000 barrels per day (bpd) in February.

The OPEC+ producers in their previous meeting agreed to stick to the scheduled output scheme ignoring requests from some countries including the US to raise the production.

The OPEC+ output deal is "essential" to oil market stability and the producers need to comply with the pact, Saudi Crown Prince Mohammed bin Salman was quoted as saying on Wednesday by international media outlets.