WTI back above $73.00, probing monthly highs amid optimistic but holiday-thinned liquidity conditions

• WTI is trading fairly subdued but remains well supported above $73.00 after dipping as low as the $72.20s earlier.
• Positive pandemic news has driven this week’s recovery from $66.00 lows, but prices are likely to remain twitchy on headlines.

Oil prices have been fairly subdued on Thursday, with holiday-thinned liquidity conditions taking their toll and squashing volatility. Front-month WTI futures currently trade just above the $73.00 level and are looking to challenge $73.25 highs printed during Asia Pacific trade. These highs were only just below the monthly high setback on 9 December at $73.30. Recent price action suggests that markets remain broadly bullish, with an earlier dip as low as the $72.20s having been bought.

Thursday’s calm marks the belated arrival of the typical pre-Christmas/New Year celebration lull, with oil prices having whipsawed in recent session amid the ever-evolving Omicron global situation. Oil prices have staged an incredible recovery this week from Monday’s lows, with WTI rallying nearly $7.0 from lows near $66.00 per barrel. Positive news on Omicron has been the main driver of the rally, with successive studies out of South Africa, Scotland and London all showing the new variant is associated with a significantly reduced risk of hospitalisations. This eases the pressure on governments to implement economically harmful/fuel demand hurting restrictions.

Strong US data also helped contribute to the market’s risk-on mode which lifted crude in recent days, meaning eyes will be on further upcoming US macro releases at 1330GMT and 1500GMT on Thursday. Traders are also citing a much larger than expected draws on US crude oil stocks, as revealed by EIA data on Wednesday, as supporting prices. But Omicron related news is set to remain the major driver of risk appetite and, though volumes are expected to thin out as the session progress, oil prices are likely to remain twitchy on headlines.