Oil futures: Prices ease back from 7-week highs, Brent holds above $84/b

13 Jan 2022

Quantum Commodity Intelligence - Crude oil futures eased back from recent highs Thursday, but consolidated most of the week's strong gains that lifted prices during the previous-session to seven-week highs, as a healthy demand outlook and recent production constraints broadly supported prices.  

Front-month March ICE Brent futures were trading at $84.58/barrel (1630 GMT), compared to Wednesday’s settle of $84.67/b, which was the highest close since late November.

At the same time, February NYMEX WTI was trading $82.40/b, versus Wednesday’s settle of $82.64/b.

Production shortfalls from several OPEC+ producers continue to underpin oil benchmarks, while a firm demand outlook also helped drive prices to the highest levels since November 25, just before the emergence of the Omicron variant.

"Crude oil continues its month-long rally and while the early January jump was driven by temporary supply disruptions, the rally has continued, driven by signs that several countries within the OPEC+ group are struggling to raise production to the agreed levels," said Ole S Hansen, Head of Commodity Strategy at Saxo Group

However, investors are keeping a close watch on China and its bid to control the spread of Omicron ahead of the Chinese New Year and Beijing Winter Olympics.

Around 20 million people are already under lockdown, while the northeastern coastal city of Dalian also reported that an individual arriving from Tianjin had contracted the Omicron variant.

Meanwhile, another large build in US gasoline inventories, up 8 million barrels over the week to January 7, was overshadowed by a seventh successive draw in commercial crude stocks.

"Crude prices extended gains after oil inventories fell to the lowest levels since October 2018. The EIA crude oil inventory posted a larger-than-expected headline decline of 4.55 million barrels versus an expected 1.6 million draw," noted Ed Moya, Senior Market Analyst at Oanda.