By Peter Nurse
Investing.com -- Oil prices climbed Monday on rising confidence that the Omicron Covid variant will have only a limited impact on global energy demand while an imminent rise in Iranian exports looks unlikely.
By 9:15 AM ET (1415 GMT), U.S. crude futures traded 2.8% higher at $68.08 a barrel, while the Brent contract rose 2.5%, to $71.65.
U.S. Gasoline RBOB Futures were up 2% at $1.9934 a gallon.
Crude markets have been hit over the last month or so by the fear that rising numbers of Covid cases, exacerbated by the recent discovery of the new Omicron variant, would hit the demand of oil just as countries start to open up again.
Both benchmarks fell for a sixth week in a row last week, with both contracts over 10% lower in the last month.
However, reports in South Africa, where the new variant was first discovered, suggest that omicron cases there had only shown mild symptoms. Additionally, President Joe Biden’s chief medical advisor Dr. Anthony Fauci told CNN in a weekend interview that “it doesn’t look like there’s a great degree of severity to it."
This has helped boost market confidence that the travel restrictions many countries have put in place to combat the variant’s spread may be short-lived, and not have a serious impact on global demand.
Adding to the positive tone was the news that Saudi Arabia, the world’s top exporter, raised the selling price for its oil heading to the U.S. and Asia, even after the Organization of the Petroleum Exporting Countries and allies decided to stick to its plan of increasing supplies by 400,000 barrels per day in January at its meeting last week.
“The move suggests that the Saudis have confidence in the demand outlook, and the market appears to be taking comfort in that,” said analysts at ING, in a note.
On top of this, the chance of additional Iranian supply hitting the global market in the near future appears to be diminishing after talks between the global powers and the Persian Gulf country on saving the 2015 Iran nuclear deal broke off last week.
Iran’s foreign ministry said on Monday it expects the next round of negotiations in Vienna will start toward the end of this week, but the two sides still seem to be too far apart for a deal to be likely in the near term.
Friday’s CFTC positioning data showed that speculators cut their net longs in the Brent contract to the smallest position since November last year, while the WTI longs were cut to the lowest since April last year.
“The flushing out of longs leaves the door open for speculators to come back into the market at these lower levels,” added ING.