(Bloomberg) -- Brent oil fell as as trading volumes thinned moving into the holiday period, but was still heading for a weekly gain on signs that the omicron variant of the virus may be less severe than previous strains.
Futures in London slipped 0.5% toward $76 a barrel on Friday. While omicron has led to some travel restrictions and surging infections, a U.K. health agency said the variant was less likely to lead to hospitalizations, compared with the delta strain. The market has been susceptible to greater volatility and wild price swings this week due to lower trading volumes.
Oil is heading for a yearly gain after a robust rebound from the pandemic but the rally has faltered recently, in part due to concerns about omicron. There are some signs of tightening emerging, however, with supply disruptions in Libya and Nigeria. An energy crunch in Europe is also raising the prospect that more oil products will be needed for power generation.
“If the omicron variant is indeed less deadly, then the economic recovery won’t be derailed and oil consumption will rise into 2022,” said Jeffrey Halley, senior market analyst at Oanda Asia Pacific Pte. “The news flow around omicron makes conditions perfect for an oil price rally.”
Omicron appears to be less severe but more contagious than any other strain to date, the U.K. Health Security Agency said Thursday. An individual infected with the variant is 50% to 70% less likely to be admitted to hospital, compared with the delta strain, the agency said.
The U.S., meanwhile, awarded a second batch of crude oil from the strategic reserve to Marathon Petroleum Corp (NYSE:MPC). as part of the Biden administration’s effort to lower energy costs. South Korea on Thursday became the first Asian consumer to follow through with a pledge to tap emergency stockpiles under the coordinated initiative.