NEW DELHI: Oil prices steadied on Wednesday as investors assessed the impact of a massive spike in COVID-19 cases caused by the Omicron variant, though the upside remained limited after US fuel inventories climbed.
Brent crude futures fell 4 cents, or 0.03%, to $80.04 a barrel by 0716 GMT, while US West Texas Intermediate (WTI) crude futures rose 2 cents, or 0.03%, to $77.01 a barrel.
The United States reported nearly 1 million new coronavirus infections on Monday, the highest daily tally of any country in the world and nearly double the previous US peak set a week ago.
US gasoline stockpiles rose by 7.1 million barrels in the week to Dec. 31, the American Petroleum Institute (API) reported late on Tuesday.
Distillate stockpiles climbed by 4.4 million barrels in the week.
The surging stockpiles, which exceeded analysts’ expectations, undermined the bullish outlook from investors in the previous session when prices climbed more than 1% as market participants took the decision of major producers to add supply next month as a sign of confidence that surging COVID-19 cases would not hit demand for long.
“Rising US production as more and more producers find it lucrative to return to the well pad is weighing on oil prices,” said Sugandha Sachdeva, vice president of commodities research at Religare Broking.
Meanwhile, the Organization of the Petroleum Exporting Countries, Russia and allies, together called OPEC+, on Tuesday agreed to add another 400,000 barrels per day of supply in February, as it has every month since August.
The decision to stick to their output increase reflected the group’s view that Omicron will only have a short-lived impact on global energy demand.
“Two consecutive days of strong gains have put crude in over-bought territory,” said Vandana Hari, founder of Vanda Insights, provider of oil market analysis.
Market sentiment will continue to see-saw, Hari said.
On one hand, there may be growing hopes that the Omicron variant may herald COVID-19’s shift from a pandemic to a more easily manageable disease, at least in highly vaccinated parts of the world.
But on the other, prices may be hit by a sobering realisation that countries remain on high alert, and governments are not ready to relax restrictions as long as infections are spiking.