WTI chops between gains and losses, now back below $72.00 amid mixed vaccine efficacy headlines

• Oil prices are choppy on Wednesday amid conflicting headlines on vaccine efficacy and worries about tighter Covid-19 curbs.
• But oil prices remain significantly higher on the week amid optimism that Omicron will be mild.

Oil prices have been choppier on Wednesday than the previous two days. Front-month WTI futures have undulated within a $71.00-$72.70ish range over the past few hours, swinging between gains and losses. The most recent uptick in volatility at the time of the CME oil pit open at 1400GMT (when volumes typically surge) saw WTI slump back under the $72.00 to around $71.75, where it trades broadly flat on the day. But the week, WTI continues to trade with gains of more than $5.0 (nearly 8.0%) and the gains versus last week’s near-$62.00 lows now stand at over $9.00 or nearly15%.

Oil markets have been driven higher this week by hopes that the new Omicron Covid-19 variant is milder than prior variants, thus presenting less of a threat to the global economic recovery. Headlines regarding the efficacy of vaccines has been mixed over the last 24 or so hours. Late on Tuesday, a study was released by scientists in South Africa showing that two doses of the Pfizer/BioNTech vaccine were only partially able to neutralise Omicron. However, Pfizer and BioNTech released a separate study this morning which essentially suggested that a third booster dose would restore vaccine efficacy back in line with the efficacy that two doses had against prior Covid-19 strains.

Risk appetite and crude oil markets have been choppy as a result of the conflicting stories, whilst oil markets have also taken notice of headlines in the UK suggesting that new Covid-19 curbs are on the verge of being introduced. One of them will include the recommendation to work from home, which of course dampens the near-term outlook for demand for fuel in the UK if fewer people are travelling. The UK doesn’t make up a large enough portion of daily global crude oil consumption for this to really matter, but the fear is that states in the oil guzzlings US may follow suit.

Looking ahead, oil traders will be watching the release of official weekly US inventory numbers at 1530GMT. Private weekly US inventory data showed a slightly larger than expected draw in crude oil stocks of around 3.1M barrels.