Oil prices on Tuesday remained buoyant with Brent crude reaching $82 per barrel because of supply pressure and positive demand for 2022, despite a high number of coronavirus infections driven by the Omicron variant.
Brent, the international benchmark, was up 1.57 per cent to $82.14 per barrel at 7.28pm UAE time, while West Texas Intermediate, the gauge that tracks US crude, was trading 1.70 per cent higher at $79.56 per barrel.
“After two days of declines, oil prices are rising today, buoyed by positive demand signals for 2022 and an expectation of global supply tightness,” Rystad Energy’s senior oil markets analyst Louise Dickson said.
“The global demand outlook for 2022 is solid, as many countries keep their borders open and avoid implementing the strict lockdowns imposed during previous Covid-19 waves on news that Omicron is a less severe strain for most who contract it.”
The optimism comes as Omicron, which was first detected in South Africa in November, has had a milder impact compared with previous strains such as Delta. The latest strain has caused less severe infections despite being more contagious, the official data shows. Hospital admissions in the US and other countries are lower when compared with earlier waves of the pandemic, according to officials.
The API (American Petroleum Institute)’s data later in the day is expected to reveal a seventh straight week of inventory declines in the US, "handing the market another bullish signal and potentially pushing WTI higher past the $80 mark”, Ms Dickson said.
“An improving supply outlook in Libya and Kazakhstan should, in theory, have a bearish impact on prices, but the market either believes the outages in Libya will be back or that demand growth will outpace the few thousand barrels at risk as the political situation remains shaky after the delayed presidential election originally set for December 2021.”
Protests broke out last week in Kazakhstan, an important oil producer and Opec+ member, over a fuel price increase. This led to large-scale violence across the country. However, Kazakh president Kassym-Jomart Tokayev said the situation was stable and Russian troops would soon withdraw from the country.
Meanwhile, pharmaceutical companies' efforts on “tweaking their vaccinations to deal with the Omicron variant,” will push the demand higher, said Naeem Aslam, chief market analyst at Ava Trade.
Pfizer and its partner BioNTech are working to redesign the Covid-19 vaccine to target the Omicron variant and it could be ready by March, Pfizer chief executive Albert Bourla said on Monday.
Other companies such as Spain's PharmaMar also started trials on animals to show its Plitidepsin drug had positive antiviral effects on Covid-19 variants, including Omicron.
Opec+, which is led by Russia and Saudi Arabia, is adding another 400,000 barrels of oil per day to the market in February as the group expects continued demand for crude.