Oil futures rose Tuesday, with U.S. prices marking their highest finish in about two months, supported by tight supplies and growing expectations that the omicron variant of the COVID-19 virus won’t derail global demand.
The market theme is “about demand recovery rather than supply concerns, although both are supportive of oil prices,” Manish Raj, chief financial officer at Velandera Energy Partners, told MarketWatch. Despite omicron’s spread, “global oil demand remains robust among all modes of transportation.”
West Texas Intermediate crude for February delivery CL00, +1.87% CLG22, +1.87% rose $2.99, or 3.8%, to settle at at $81.22 a barrel on the New York Mercantile Exchange. That was the highest front-month contract prices finish since Nov. 11, according to Dow Jones Market Data.
Both WTI and Brent have rallied nearly 8% so far in 2022.
Tuesday’s gains came despite reports that production in Libya had recovered and that activity at Kazakhstan’s Tengiz oil field had returned to normal. Worries about hits to production in the two countries had helped to lift crude last week.
Oil production in Libya has returned to 1 million barrels a day after militias lifted a three-week blockade of oil fields, including the nation’s largest, Bloomberg reported. Chevron Corp. CVX, -0.59%, which leads the Tengizchevroil consortium, said production at Kazakhstan’s 600,000-barrel-a-day Tengiz oil field has returned to normal after being disrupted by unrest last week, according to Argus.
While exports from Libya’s western oil ports are likely to begin again soon, exports “from most of Libya’s other oil ports have been suspended due to bad weather this week, meaning that the higher oil production in the country has not yet translated directly into an increase in available oil supply,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note. “This may explain why oil prices have not responded as yet to the reopening of the Libyan oil fields.”
Traders are also closely watching tensions within Kazakhstan but there has not been any meaningful impact to oil production, said Velandera Energy’s Raj.