Brent near $80 as market shrugs off Omicron

Oil prices extended gains on Tuesday, with Brent crude trading near $80 a barrel despite the rapid spread of the Omicron coronavirus variant, supported by supply outages and expectations that U.S. inventories fell last week.

Brent crude rose by 60 cents, or 0.8%, to $79.20 a barrel by 12 p.m. EST (1700 GMT). U.S. West Texas Intermediate (WTI) crude rose 57 cents, or 0.8%, to 76.14.

Both contracts traded at their highest levels in a month, aided by strength in U.S. equities.

“The stock market appears poised to finish the year at or near record highs with easy spillover into the oil space bushing crude values higher,” said Jim Ritterbusch, president of Ritterbusch and Associates LLC in Galena, Illinois.

“Support comes as well from high aggregated production disruptions in Ecuador, Libya, and Nigeria and the expectation of another large drop in U.S. crude inventories,” said UBS oil analyst Giovanni Staunovo.

The three oil producers declared forces majeures this month on part of their oil production because of maintenance issues and oilfield shutdowns.

Meanwhile, a preliminary Reuters poll showed on Monday that U.S. crude oil inventories are likely to have dropped for the fifth week in a row, while gasoline inventories were seen mostly unchanged last week.

England will not face any new COVID-19 restrictions before the end of 2021, British health minister Sajid Javid said on Monday, as the government awaits more evidence on whether the health service can cope with high infection rates.

U.S. President Joe Biden, meanwhile, pledged to ease a shortage of COVID-19 tests as the Omicron variant threatens to overwhelm hospitals and stifle travel plans.

Omicron-induced staff shortages led to thousands of flight cancellations over the Christmas weekend in the United States.

Investors are awaiting an OPEC+ meeting on Jan. 4, at which the alliance will decide whether to go ahead with a planned production increase of 400,000 barrels per day in February.

At its last meeting, OPEC+ stuck to its plans to boost output for January despite Omicron.

Money managers raised their net long U.S. crude futures and options positions in the week to Dec. 21, the U.S. Commodity Futures Trading Commission said on Monday.

The speculator group raised its combined futures and options position in New York and London by 4,634 contracts to 259,093 during the period.