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Crude oil futures start 2022 on bullish note amid thin volume

  • Author
  • Andrew Toh
  • Editor
  • Kshitiz Goliya
  • Commodity
  • Oil

0226 GMT: Crude oil futures rose in mid-morning trade in Asia Jan. 3 on easing COVID-19 concerns and as the ongoing optimism from the Santa Claus rally carried over into the new year amid thin trading volumes.

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At 10:26 am Singapore time (0226 GMT), the ICE March Brent futures contract was up 29 cents/b (0.37%) from the previous close at $78.07/b, while the NYMEX February light sweet crude contract rose 32 cents/b (0.43%) at $75.53/b.

Several markets in Asia, including Japan and Australia, were closed Jan. 3 for the holidays.

"Following a relatively quiet day in terms of economic data, volume may continue to remain light while sentiments revolving around the Santa Claus rally may still mark an attempt to deliver a positive start for the first trading day in 2022," said IG market strategist Yeap Jun Rong.

Historically, financial markets tend to rise during the year-end Christmas period, analysts noted, leading many to deem it the Santa Claus rally.

Both crude oil benchmarks closed 2021 with gains of up to 55% as the global economy recovered from the worst of the COVID-19 hit in early 2020, though the rally saw disruptions from the delta and subsequently omicron strains of the virus.

Analysts said concerns remained over the surge in COVID-19 caseloads in the US and some parts of Europe. On the bright side, hospitalizations and deaths have not risen as much as in previous waves, giving governments less impetus to resort to the same extreme lockdowns seen at the start of the pandemic.

The US, for instance, saw its seven-day moving average hit a fresh record high of 316,277 infections on Dec. 29, latest data from the US Centers for Disease Control and Prevention showed, though average deaths were less than half of the country's peak of 3,421 in January 2021.

"Focus will stay on the COVID-19 pandemic developments globally, with US and many parts of Europe experiencing record surges in COVID-19 infections due to the highly transmissible Omicron variant and hospitalization rates also rose," said UOB bank analysts in a note Jan. 3.

Focus will turn toward the OPEC+ meeting set to kick off Jan. 4. Expectations are high that the group will follow through on its plan to raise output by another 400,000 b/d.

"Market expectations are for its members to remain on course for adding another 400,000 b/d to its output policy, reaffirming the belief that oil demand will remain firm to handle Omicron risks and additional stockpile reserve releases by some oil-consuming nations," said IG's Yeap.