Oil rebounds towards $72 on Omicron hopes and Iran talks

Representative image (Source: Reuters)

Oil climbed by $2 a barrel towards $72 on Monday on hopes that the Omicron coronavirus variant would have a less damaging economic impact if its symptoms proved mostly mild and as the prospect of an imminent rise in Iranian oil exports receded.

Reports in South Africa said Omicron cases there had only shown mild symptoms and the top U.S. infectious disease official, Anthony Fauci, told CNN "it does not look like there's a great degree of severity" so far.

Brent crude gained $1.35, or 1.9%, to $71.23 a barrel by 1439 GMT while U.S. West Texas Intermediate crude advanced $1.43, or 2.2%, to $67.69. Both benchmarks fell for a sixth week in a row last week.

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"If Omicron is proven over the coming days – or weeks – to be less aggressive, even if it is more contagious, then we can say 100% last week's lows were the bargain of the quarter," said Jeffrey Halley, an analyst at brokerage OANDA.

Brent has risen 38% this year, supported by output curbs led by the OPEC+ group of producers, though it has fallen from a three-year high above $86 in October.

"Traders are brushing off the initial panic over the Omicron variant," said Louise Dickson of Rystad Energy. "The oil market seems to now be convinced that higher price levels are warranted."

The OPEC+ group, comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, last week decided to continue increasing monthly supply by 400,000 barrels per day (bpd) in January, even after a slide in prices driven by Omicron concerns.

On Sunday Saudi Arabia raised January official selling prices for all crude grades sold to Asia and the United States by up to 80 cents from the previous month.

Oil was also buoyed by diminishing prospects of a rise in Iranian oil exports after indirect U.S.-Iranian talks on saving the 2015 Iran nuclear deal broke off last week.