What about Market demand?
After a few days of recovery mood in the market, especially with positive comments from US officials that the Omicron variant is not as dangerous as it was expected, again UK new rules and restrictions changed the game. Now there are more doubts in the market about the possibility of lockdowns during the New Year holidays. On the other hand, the Gas shortage is still suffering the markets while many market participants mention the stand-off over troops on the Ukrainian border as a reason that why we should worry about the Gas and Oil prices.
Earlier this week we had EIA short-term energy outlook. According to the EIA report, after having the $81 as the average of Brent crude oil spot prices in November, December average price was estimated at $71/b. Market demand can increase if we do not have the Omicron risks, because we know that Gas shortage will increase the Oil demand, especially in such a cold expected winter. The potential effects of Omicron on the market are not clear yet. If more countries follow the UK reaction, then we will have downside risks to the global oil consumption forecast, particularly for jet fuel.
On the other hand, hand, we had US inventory levels data yesterday, which also weighed on prices. According to the Energy Information Administration report, US crude inventories were down by 240,000 barrels last week, much less than expectations, while American Petroleum Institute (API), data a day before that showed a draw of well over 3 million barrels.
Despite all of these, oil prices are still higher more than 8%, after a 16% loss in the last week of November and the first week of December. And so far, published data and updates indicate that Omicron cases have only shown mild symptoms and current drugs are effective against that.
From the technical point of view, RSI at 54 and increasing OBV trend line with prices above both 20&50 Ma lines confirm the overall positive market sentiment.
