U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Tuesday with prices touching a one-month high on hopes that the Omicron coronavirus variant will have a limited impact on fuel demand.
At 10:36 GMT, March WTI crude oil futures are trading $76.07, up $0.89 or -1.18%. March Brent crude oil is at $79.05, up $0.83 or +1.06%. On Monday, the United States Oil Fund ETF settled at $54.51, up $1.38 or +2.60%.
Technically, both markets are in strong positions to continue the rally with WTI traders targeting $77.85 and Brent traders eyeing $81.10.
Thin-Holiday Volume, Risk-On Sentiment Continues
The bullish price action indicates buyers are taking advantage of the thin-holiday volume and the lack of sellers. Additionally, the markets seem to have already digested Omicron concerns. Meanwhile the focus has now shifted to the January 4 OPEC+ meeting.
Traders have clearly walked back any concerns from late November when the Omicron variant of COVID-19 first emerged and sent investors scurrying for safe havens. Crude oil wasn’t really hit hard, but gains were clearly being limited by the news.
Now that the worst fears of the impact of the new variant have subsided, investors are returning to risk assets. This is helping to pressure the safe-haven U.S. Dollar, while driving up demand for dollar-denominated crude.
Traders Showing Little Reaction to Rising Omicron Cases
China reported 209 new confirmed coronavirus cases for December 27, up from 200 a day earlier, mostly in the northwestern province of Shaanxi, where Xian, the provincial capital, is in lockdown.
Elsewhere, authorities in Britain and France have held off from imposing tough restrictions on movement, betting that high vaccination rates will stop hospitals from being overwhelmed even as cases surge.
Crude oil traders are reacting as if they’ve seen this news before when the Delta variant arrived. This time, they are not panicking, especially since the number of deaths from Omicron is low.
The biggest fear for traders may be profit-taking ahead of the New Year holiday this weekend. Additionally, trading volume could drop off substantially and the trade could turn cautious.
Looking ahead to next week’s OPEC+ meeting on January 4, traders are expecting the group to stick with its plan to raise production by 400,000 barrels-per-day in February. Traders are expecting to take this news as a vote of confidence for future demand like they did on December 2.
Meanwhile, the bullish news continues. According to the U.S. Commodity Futures Trading Commission, money managers raised their net long U.S. crude futures and options positions in the week to December 21.