Oil prices climb towards $80 per barrel on tight supply; stocks fall

Oil prices edged towards $80 per barrel on Wednesday as global supply outages and declining US inventories offset worries that rising Covid cases might reduce demand.

Brent crude rose to as much as $79.20 a barrel earlier before retreating to trade flat on the day at $78.01 a barrel by 1055 GMT. US West Texas Intermediate crude edged 13 cents lower to $75.85 a barrel, having climbed to $76.17.

Both contracts are trading near their highest levels in a month, aided by the strength in global equities.

"Markets are overwhelmingly pricing in the latest coronavirus variant as a milder incarnation, despite its easier contractibility," said OANDA Analyst Jeffrey Halley in a note. "With market activity much reduced for the holiday season, investors continue to tentatively price in a global recovery hitting a minor bump, and not a pothole," he added.

The American Petroleum Institute data showed US crude stocks fell by 3.1 million barrels in the week ended December 24, market sources said late on Tuesday, in line with expectations of nine analysts polled by Reuters.

Weekly data from the US Energy Information Administration is due later on Wednesday. Oil prices have been underpinned by Ecuador, Libya, and Nigeria declaring force majeures this month on part of their oil production because of maintenance issues and oilfield shutdowns.

Russian Deputy Prime Minister Alexander Novak said that the Organization of the Petroleum Exporting Countries-plus (Opec+) has resisted calls from Washington to boost output because it wants to provide the market with clear guidance and not deviate from policy on gradual output increases.

Investors are awaiting an Opec+ meeting on January 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.