By Peter Nurse
Investing.com -- Oil prices settled higher Tuesday as an improvement in risk appetite helped recoup all of the previous session's losses. But year-end volatility and a resurgence of Covid cases via the Omicron variant meant that market participants had to be cautious of violent snapbacks at any time.
West Texas Intermediate, the benchmark for U.S. crude, settled up $2.51, or 3.7%, at $71.12 a barrel, after oscillating between a session peak of $71.53 and low of $68.56. Last week, WTI fell 1.1%. It hit seven-year highs of $85.41 in mid-October, before falling.
London-traded Brent, the global benchmark for oil, settled up $2.46, or 3.4%, at $73.98 a barrel, after a session high of $74.22 and bottom of $71.24. Last week, Brent was down 3.3%. The global crude benchmark hit $86.70 in mid-October, matching highs from 2014, before falling.
Helping the tone Tuesday was the news from Moderna (NASDAQ:MRNA) that the U.S. drugmaker could develop a booster shot to protect against the Omicron variant in a relatively short period.
"It only needs minor adjustments for Omicron. I don't expect any problems," CEO Stephane Bancel said in an interview with the Swiss newspaper TagesAnzeiger published on Tuesday.
Additionally, the sight of power stations in Europe starting up their fuel oil-burning units for the first time in years as freezing weather sets in boosted sentiment.
Energy prices have spiraled this year, with European gas surging more than 600% as Russia limited natural gas flows through a major transit route to Germany. The route is set to be only partially used in January.
However, these gains could be short-lived as Omicron infections are multiplying rapidly across Europe, the United States and Asia, prompting many countries, particularly across Europe, to consider new restrictions on movement during the financially-important festive period.
"It also looks increasingly likely that the U.K. will reimpose restrictions sometime after Boxing Day (Dec. 26), with daily cases moving to record highs," JBC Energy analysts said in a note.
Investors now await U.S. crude oil supply data from the American Petroleum Institute, due later in the day, as a gauge of demand in America, the largest consumer of crude in the world.
The industry body estimated that crude stockpiles fell 815,000 barrels for the week ended Dec. 10, while the official government inventory report showed a draw of over 4.5 million barrels.
(Additional reporting by Barani Krishnan)