Crude oil prices are on an end-of-year rise, indicating traders have gotten over their initial fears that omicron-driven coronavirus infections would send demand plummeting.
Global benchmark Brent crude is up more than 14.5% since the beginning of the month, trading near $80 per barrel on Tuesday for the first time since late November. West Texas Intermediate crude is also up nearly 7% over a week ago.
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The rise reflects a demonstrable change in how the market is responding to the omicron variant. When news of the variant initially picked up following the Thanksgiving holiday, oil took a steep plunge to below $70 per barrel as the market feared an ensuing drop in demand.
Prices have since recovered despite a rise in infections in the United States and elsewhere, as officials like Anthony Fauci temper worries about its severity, even as he discourages big gatherings.
“The data from the U.K., and particularly Scotland and England, two separate studies, really confirmed that," Fauci said on ABC This Week on Sunday. "They're seeing less of a severity in the form of manifestations by hospitalizations."
Kevin Book, a managing director at ClearView Energy Partners, made note of a few caveats to consider in making sense of crude prices, including that the month of January typically sees a seasonal drop in demand.
"That said, the market may be looking past demand weakness because consumers and many governments are trying to look past omicron, especially after supply tightened with several overseas field outages," Book told the Washington Examiner.
Book said traders also seem to be betting that producers aren't getting ready to plunge a bunch of capital into new output, as well as a continuation of the U.S.'s standoff with Iran, which is keeping the country's oil product on the sidelines due to sanctions.
Beyond raw crude, some are warning the rise in prices doesn't bode well for drivers, who have had a taste of relief in recent weeks as the nation's average gasoline price dropped from above $3.40 per gallon to below $3.30.
"It's becoming more clear that our month-long run with falling #gasprices is likely coming to an end," Patrick De Haan, an oil analyst for GasBuddy, wrote in a Monday tweet.
A new GasBuddy forecast projects prices to peak at a monthly average of $3.79 per gallon in May 2022 before falling again, CNN reported.
Recent comments from Energy Secretary Jennifer Granholm show the Biden administration is still concerned about such a scenario and wants to see more movement in the market, even after President Joe Biden announced a release of up to 50 million barrels of crude from the Strategic Petroleum Reserve in an effort to bring prices down.
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During a meeting of the National Petroleum Council earlier this month, Granholm urged domestic oil and gas producers to bring more product to market, marking a change in posture for the administration, which for months had withheld such calls.
“While I understand that you may disagree with some of our policies, it doesn’t mean that the Biden administration is standing in the way of your efforts to help meet current demand,” Granholm told the meeting of oil and gas company executives. “Please take advantage of the [federal land drilling] leases that you have. Hire workers, get your rig count up."