FEAR fades and oil price drifts higher - Dec 8

[dan_s]

NEW YORK (Reuters) -Oil prices edged up in choppy trade on Wednesday, maintaining a positive tone as investors have become less concerned that the Omicron coronavirus variant will have a dramatic effect on global economic growth and fuel demand.

Brent crude futures rose by 46 cents, or 0.6%, to $75.91 a barrel at 12:54 p.m. EST (1754 GMT). U.S. West Texas Intermediate crude was at $72.52 a barrel, up 47 cents or 0.7%.

Global benchmark Brent has rebounded by about 10% since Dec. 1 on the expectation that Omicron will have only a limited impact on oil demand, after a 16% drop since Nov. 25. Early studies suggest that vaccinations against coronavirus are still effective against this variant. < The more serious Delta Variant only reduced oil demand by 500,000 bpd.

"Around two-thirds of the previous price slide (has) been corrected," Commerzbank (DE:CBKG) said in a note. "There has been no noticeable slowing effect on oil demand as yet. Even aviation, the sector that should have been hit first, has seen only a marginal decrease in seating capacity."

The market had a muted reaction to U.S. weekly inventory figures, which showed a smaller-than-anticipated decline in crude stocks and another bump up in overall production, giving credence to expectations that supply will increase in coming months. [EIA/S]

The U.S. Energy Information Administration said product supplied by refineries, a proxy for demand, was 20.9 million barrels per day over the past four weeks - exceeding pre-pandemic rates of consumer use.

"Unless travel restrictions are re-imposed, we expect U.S. oil demand to hold up in the coming months," said Caroline Bain, chief commodities economist at Capital Economics.

The emergence of the Omicron variant combined with the U.S. decision to release inventories from its strategic reserve to knock the market back on expectations that supply would outweigh demand by the early months of 2022.

Ultimately, the Organization of the Petroleum Exporting Countries and its allies including Russia, known as OPEC+, chose to maintain its schedule of boosting supply by 400,000 bpd every month - despite fears that the new variant would sap demand.

The market was also focused on the resumption of talks between Washington and Tehran over Iran's nuclear programme. Western officials have voiced dismay at sweeping Iranian demands. If U.S. sanctions were eased, it could lead to higher exports of Iranian oil, which could add downward pressure on oil prices. < IMO Iran has no intention to slow down their uranium enrichment program. They are just play a game with Team Biden and Europe, which they view as very weak negotiators.

Tensions between Western powers and Russia over Ukraine also remained high after U.S. President Joe Biden warned Russian President Vladimir Putin on Tuesday that the West would impose "strong economic and other measures" on Russia if it invades Ukraine, while Putin demanded guarantees that NATO would not expand farther eastward. < All we have to do is tell Russia that Ukraine is not getting into NATO and this tension ends. Team Biden's list of stupid moves keeps getting longer, but going to war with Russia over Ukraine would top the list.

[Fraser921]

Inventories are dropping too

In the week ending Dec. 3, we estimate that the stocks of refined crude #oil products at five major ports (NLAMS, BEANR, AEFJR, NLRTM, SGSIN) likely decreased to 93.44 MMbbl (-3.51 MMbbl w-o-w). The annual deficit has expanded to -30.53 MMbbl (from -26.74 MMbbl a week ago).#OOTT https://t.co/qsw9GkqyVv

[dan_s]

I think there is a perception that oil supply exceeds demand. Reality is that above ground inventories have fallen by more than a million barrels per day all year and are likely still falling.

January and February are the seasonal low points for demand, but demand picks up starting in March and increases by close to 2 million bpd in April. This happens every year.