Oil posted its biggest annual advance since 2009 as COVID-19 vaccination rollouts accelerated the reopening of economies, spurring global consumption, while crude production returned at a more moderate pace.
West Texas Intermediate (WTI) rose 55 percent for the biggest year-to-date gain in more than a decade. Brent, the global benchmark, rose 50 percent, the largest gain since 2016.
On Friday, WTI for January delivery fell 2.31 percent to US$75.21 a barrel, but gained 1.92 percent from a week earlier.
Photo: Reuters
Brent crude for February delivery declined 2.2 percent to US$77.78, but posted a weekly gain of 2.15 percent.
Investors are now trying to gauge the outlook for energy demand over the coming year as the latest COVID-19 variant rapidly spreads and OPEC gathers with allied producers next week to discuss output policy.
US crude also finished the year with the longest run of consecutive quarterly increases since 1983.
The discovery of the Omicron variant of SARS-CoV-2 in late November last year briefly jolted markets and threatened to quash the rally, but crude recovered as demand appeared to withstand rising infections.
Ongoing optimism in the recovery is reflected in the market structure, with benchmark Brent’s prompt spread in a bullish backwardation of US$0.43 a barrel compared with a bearish contango less than two weeks ago.
“Crude oil had an excellent 2021, supported by ongoing decline of oil inventories benefiting from the demand recovery and oil supply lagging demand growth,” UBS Group AG commodity analyst Giovanni Staunovo said.
However, heading into this year “the oil market remains dependent on oil from OPEC+,” Staunovo said.
OPEC and allies, including Russia, are to meet early next week to decide on production levels for February. The group has been gradually restoring shuttered capacity, usually in monthly increments of 400,000 barrels a day.
Oil’s rally last year was also due to an energy crunch, prompted by shortages of natural gas and coal earlier this fall.
Surging gas prices led to rising demand for alternative power generation in Europe and Asia heading into the Northern Hemisphere winter.
Additional reporting by staff writer
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