Oil nudged above $75 a barrel on Thursday, supported by record U.S. implied demand and falling crude stockpiles, even as the spread of the Omicron coronavirus variant threatens to put a brake on consumption globally.
Crude and other risk assets such as equities also got a boost after the U.S. Federal Reserve gave an upbeat economic outlook, which lifted investor spirits even as the Fed flagged a long-awaited end to its monetary stimulus.
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Demand has been rising in 2021 after last year's collapse, and the U.S. Energy Information Administration (EIA) on Wednesday said product supplied by refineries, a proxy for demand, surged in the latest week to 23.2 million barrels per day (bpd).
"These figures suggest a healthy economic backdrop," said Tamas Varga of oil broker PVM.
"Although the Fed's announcement triggered a jump in both oil and equity prices, the withdrawal of economic support together with the Omicron crisis are the two major headwinds the oil market is currently facing," he added.
Lending further price support, the EIA also reported that U.S. crude stocks fell 4.6 million barrels, more than analysts had forecast.
Worries about the virus and the prospect of a supply surplus next year, as flagged by the International Energy Agency in its monthly report this week, limited gains.
Britain and South Africa reported record daily COVID-19 cases while many firms across the globe asked employees to work from home, which could limit demand going forward.
"We are skeptical despite the latest news that the good sentiment on the oil market will be carried over into the first quarter," said Barbara Lambrecht of Commerzbank. "After all, a substantial supply surplus is looming."