WTI is creeping higher in an extension of the 29 Nov' weekly rally

• WTI bulls stay in charge and are extending into the $80 again in supply constraints. 
• While demand is sapped due to covid, there are supply issues that are playing out from Africa, US and Central Asia. 

Covid remains a thorn in the side for West Texas Intermediate (WTI) demand and crude oil prices have climbed on Thursday on supply shortages while Libya exports continue to falter. At the same time, civil unrest in Kazakhstan is troublesome for central Asia production.

On a spot basis, WTI is up by some 0.6% at $80.10bbls and has rallied from a low of $79.49bbls to a high of $80.15bbls. As for futures, WTI crude for February delivery settled up US$1.61 to US$79.49 per barrel, the highest since mid-November, while March Brent crude, the global benchmark, was last seen up US$1.84 to US$82.17.

In central Asia, the political situation in Kazakhstan is becoming increasingly tense. Russia and its allies have sent troops to help quell unrest where riots erupted following a hike to fuel prices. Kazakhstan has been producing 1.6 million barrels of oil per day.

Reuters reported that Libya's output has also dropped by about 500,000 bpd due to repairs to a key pipeline and the closure of the country's largest oilfield by a militia group.

The supply-demand battle is falling into the hands of the bulls despite the spread of the Covid-19 Omicron variant. For instance, the Energy Information Administration on Wednesday reported that while US crude-oil inventories fell for a sixth-straight week, gasoline inventories rose by 10.1 million barrels. This was the largest weekly rise since April 2020.

''In energy markets, supply risk has been mispriced for weeks,'' analysts at TD securities argued.  In line with other growth-oriented commodities, a growing supply risk premium helps to explain the resilience in oil prices, despite the risk-off trading regime sparked by the hawkish Fed minutes,'' analysts at TD Securities explained. 

The analysts added that ''while the omicron variant's higher transmissibility will be more highly correlated with mobility restrictions than its severity, we reiterate that rising geopolitical and operational risks are driving prices higher, despite OPEC+ agreement to raise output by 400k bpd next month. ''

''After all,'' they said, ''flight cancellations for the 12 weeks ahead have shed 4.4% of the global flight schedule since last week, highlighting that the virus is having a noteworthy impact on travel, although resilient global mobility and factory activity is providing an offset for energy demand.''

''Yet, energy supply risks continue to rise irrespectively of the OPEC+ group's decision to raise output, as Libyan production is suffering from clashes amid a contentious presidential election.''