WTI advances back to pre-Omicron levels in the $78.00s, shrugs off bearish inventory data

• WTI has advanced into the $78.00s, up $4.0 from earlier weekly lows and back to pre-Omicron levels.
• Oil prices have shrugged off a bearish weekly US oil inventory report as post-OPEC+ meeting optimism continues.

Oil markets have shrugged off bearish weekly US inventory numbers and are advancing higher, with front-month WTI futures having broken to the north of resistance in the mid-$77.0s to now trade in the mid-$78.0s. That marks its highest price since 25 November, the day before Omicron fears swept financial markets, with WTI now up roughly $4.0 from earlier weekly lows. Short-term bullish oil speculators will likely be targeting a test of a key level of support turned resistance from back in mid-November around $79.30. The most notable support to the downside is around $77.50 and the 50-day moving average just under $76.00.

There hasn’t been anyone notable catalyst for Wednesday’s move higher. Traders continue to sight Tuesday’s OPEC+ decision to press ahead with pre-existing plans to hike output by 400K barrels per day in February. The decision has been taken by some as a vote of confidence in the oil market’s ability to take more supply. Meanwhile, analysts at Barclays noted that “while OPEC+ raised its output target, it will likely struggle to reach it, as members including Nigeria, Angola and Libya face difficulties ramping up production”. “OPEC+ has adopted the path of least (political) resistance, as it continues to stay the course on increasing output targets,” the bank continued, “but actual incremental supplies are likely to be much smaller, similar to the demand effect from Omicron”.

Elsewhere, oil prices shrugged off a bearish weekly US EIA crude oil inventory report. To recap the details, crude oil stocks saw a smaller than expected draw of 2.144M barrels (versus 3.283M expected), gasoline stocks saw a massive 10.128M barrel build (versus 1.775M expected) and distillates saw a large 4.418M barrel build (versus 1.525M expected). The report did not come as that much of a surprise given that the alternative private inventory report from API released on Tuesday also showed big gasoline and distillate inventory builds.