Crude oil futures higher as risk-on sentiment lifts asset prices

Crude oil futures moved higher in mid-morning trade in Asia Dec. 13 as risk-on sentiment in the broader financial markets lifted asset prices despite ongoing risks from the omicron variant of the coronavirus.

At 10:40 am Singapore time (0240 GMT), the ICE February Brent futures contract was up 84 cents/b (1.12%) from the previous close at $75.99/b, while the NYMEX January light sweet crude contract was 92 cents/b (1.28%) higher at $72.59/b.

Most Asian equity indices were higher in early trade, with MSCI's broadest index of Asia-Pacific shares outside Japan up 0.71% as of 0240 GMT.

"Asia markets are set for a positive opening, largely tracking the positive momentum from Wall Street," IG market strategist Yeap Jun Rong said.

Oil prices were climbing in line with other risk assets as investors remained optimistic that the omicron variant would not have as large an impact on oil demand as initially feared. A widely-watched US inflation reading Dec. 10 came in within expectations, sparking modest changes in the US dollar index on the day.

Analysts also noted that movement traffic in the US appeared to have returned to pre-pandemic levels.

"US flights are back to their 2019 level. US highways are also at their most congested since the pandemic began," said ANZ Research analysts Brian Martin and Daniel Hynes in a note, citing data from Flightradar24.

Data from the US Labor Department Dec. 10 showed US consumer prices for November rising 6.8% on the year, the biggest year-on-year gain since June 1982.

While the reading notched fresh multi-year highs, coming after October's 6.2% print, analysts said the figure was nonetheless already priced into markets.

"US annual CPI inflation came in as expected, sparking a relief rally that saw the S&P hit record highs despite the traditional warning sign provided by the flattening of the yield curve," ANZ Research analysts Brian Martin and Daniel Hynes said in a note.

Nonetheless, sentiment remains capped by the ongoing spread of COVID-19 across Europe. The UK Dec. 12 raised the country's official coronavirus threat level to 4 on a 5-point scale. Level four means "transmission is high and pressure on healthcare services is widespread and substantial or rising."

Markets were also watching for the outcome of talks between Iran and world powers. Iran's chief negotiator reported some progress on negotiations over the weekend. Analysts said a deal reached would see at least 1 million b/d of Iranian oil returning to global oil markets.