Big U.S. Crude Draw, Huge Asia Mobility Numbers Propel Oil Prices Upward

However, U.S. drillers are being shunned by banks for 'political' reasons: File Image/Pixabay

For all the media-inspired dread over omicron, global oil demand at the end of 2021 remains vigorous, and accordingly crude prices on Wednesday rose yet again, with West Texas Intermediate closing at $76.56 per barrel – and both WTI and Brent heading for its biggest annual gain in more than a decade.

The uptick was attributed to a larger than expected draw of U.S. crude inventories: an estimated 3.58 million barrels last week, even though domestic crude output rose to its highest since May of 2020.

Rob Thummel, a portfolio manager at Tortoise, said, "Consumer behaviour relating to oil demand is not being impacted by any concerns about omicron."

Prices were also supported by data compiled by Bloomberg showing that road traffic was strong across  Asia in December: all countries but China registered a rise in mobility as logged by Apple Inc. mobility statistics, due to that country's relentless zero-Covid approach causing lockdowns that have stymied travel plans.

In India, diesel sales in the first half of this month were up 18 percent on-month, while gasoline usage rose about 7 percent (for the record, that country has avoided fresh restrictions to slow omicron, which is increasingly being considered the weakest of all Covid strains with the least burden to health care systems).
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Traffic in Australia over the holiday season was 12 percent higher than in November as that country's government lifted restrictions despite rising omicron infections.

Not all is rosy in the oil market, however: the Federal Reserve Bank of Dallas stated in a report released Wednesday that drillers at the biggest U.S. fields are dealing with record costs while some banks are increasingly reluctant to loan money to the sector.

An unidentified survey respondent said, "Banks view lending to the energy industry as having a 'political risk'; the capital availability has moved down-market to family offices, etc., and it is drastically reducing the size and availability of commitments regardless of commodity prices."

Still, as the year draws to a close, and despite seemingly endless media warnings about omicron's spread, bullish signs for crude abound, the latest being that Brent closed above its 50-day moving average for the first time in a little over a month.