Crude oil futures pushed higher during mid-morning trade in Asia Dec. 7 after strong overnight gains, as concerns continued to ease over the severity of the omicron variant of the coronavirus.
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At 10:30 am Singapore time (0215 GMT), the ICE February Brent futures contract was up 43 cents/b (0.62%) from the previous close at $73.51/b, while the NYMEX January light sweet crude contract rose 58 cents/b (0.59%) at $70.07/b.
"Oil prices were up by almost 5% [on Dec. 6], with easing virus concerns and diminishing prospects of Iranian supplies," IG's market strategist Yeap Jun Rong said in a note Dec. 7.
Optimism was growing among investors that the worst is likely over for the concerns surrounding the omicron variant.
Analysts have maintained that the recent sell-off that sent oil prices crashing by more than 20% over the last two weeks was overdone. Emerging reports continued to cement the view that governments will not see the same scale of fatalities and hospitalizations that characterized earlier variants.
That optimism sent both front month crude oil benchmarks settling 4.6%-4.9% higher overnight.
"While markets continue to await scientific updates on the omicron variant, news-driven expectations are that it will be more transmissible, but less severe and existing vaccines may work on the variant to some degree," Yeap said. "Thus far, the surge in COVID-19 cases in South Africa has not overwhelmed hospital capacity, which is fueling some optimism among the dip buyers that the previous sell-off for reopening sectors may have been overdone."
ANZ Research analysts Brian Martin and Daniel Hynes noted comments by US White House medical adviser Anthony Fauci that there does not appear to be a "great degree of severity" to the variant, despite it having spread to 17 US states as of Dec. 6.
"This lowers the probability of the worst case scenario that the oil markets have been pricing in over the past couple of weeks," Martin and Hynes said.
Analysts continued to flag the risk of a stronger dollar on oil prices. While the current trading week Dec. 6-10 looked to be relatively clear of key economic data releases, a keenly-awaited report on US inflation for November will be released on Dec. 10.
A repeat of last month's October inflation print, a 31-year high, will boost the case for the US Federal Reserve to raise the scale of tapering of its monthly asset purchases and bring forward the date of its first interest rate hike.
"Crude's next big move might be dictated by the dollar and might not have a clear trajectory until Friday's [Dec. 10] inflation report," OANDA's senior market analyst Edward Moya said.
As of 0230 GMT, the US dollar index was down 0.07% at 96.26.