Oil rises with investors weighing demand risk from Omicron variant

Oil rose as investors weighed the rapid spread of Omicron and flight cancellations against signs it may be milder than previous variants. Brent futures rose 0.7 per cent, swinging between gains and losses amid thin trading volumes. West Texas Intermediate, which didn’t have a settlement on Friday due to a US holiday, fell from Thursday’s level. Daily Omicron infections in the US has surpassed those in the delta wave.

Still, Brent’s market structure is starting to show signs of optimism. The prompt timespread — the gap between the two nearest contracts — has returned to a bullish pattern in recent days after flipping briefly into a bearish contango structure. The spread was 37 cents in backwardation on Monday, compared with as much as 10 cents in contango about a week ago.

Crude’s rally from the depths of the pandemic has run into considerable headwinds with Omicron’s spread. At the same time, the Organization of Petroleum Exporting Countries and its allies are boosting supplies, and the US has led a coordinated release of oil from national strategic reserves.