28.12.202114:10 Forex Analysis & Reviews: Oil continues to rise despite spread of Omicron

Oil prices edged up in Tuesday's trading due to market optimism, causing oil to trade near its one-month high. The benchmark Brent crude futures rose by 1.16% to $79.38 and WTI crude futures also increased by 1.24% to $76.84 amid easing concerns about the Omicron variant.

Oil showed positive dynamics on Monday and surpassed $78 a barrel. The growth was probably triggered by the market positive sentiment, formed amid the S&P 500 hitting its all-time highs. Rise in oil quotations only strengthened closing of short positions.

According to the news bulletins, the Omicron strain no longer poses a serious threat to traders. It was reported that its rapid spread was not dangerous as the majority of infected people had mild symptoms. This fact allowed investors not to worry about the demand for fuel.

The UK health minister unexpectedly announced that the British authorities would not impose stricter restrictions on the UK residents, at least until the end of this year. This decision will probably encourage other EU countries not to tighten their lockdown measures.

However, at the same time American airlines have already canceled more than 1,300 flights last Sunday. They explained that the reason was bad weather and they had to reduce most of their staff due to an increase in COVID-19 cases. Even some cruise ships have announced the stoppage of their voyages as the coronavirus cases were detected on board. Therefore, the main problem caused by the Omicron variant is disruption in the delivery of goods and services.

However, a White House spokesman, who decided not to disclose his name, told the media that the current situation at airports is much better than it was last Christmas: only some flights were cancelled.

Oil surged by more than 50% in 2021. The main reason is strong demand growth. At the same time, the Organization of the Petroleum Exporting Countries and its allies (OPEC +) have markedly reduced supply.

Indirect talks between the US and Iran on salvaging the 2015 Iran nuclear deal resumed on Monday. The Iranian government said that oil exports were the main topic of the talks, however it has not been possible yet to agree on an increase in supplies of Iranian crude oil.

Trading volumes were noticeably lower amid pre-holiday days. Besides, there were no concerns about the Omicron variant, so the most anticipated event is the OPEC+ meeting, which will take place on January 4. That day, the issue of increasing the oil production by the planned 400 thousand barrels per day in February will be discussed. Notably, at its last meeting OPEC stuck to its plans to increase oil production in January, even despite rapid spread of the Omicron variant around the world.