Florence Tan

SINGAPORE, (Reuters) – Oil prices rose on Tuesday following a nearly 5% increase the previous day. However, concerns over the Omicron variant’s impact on global fuel demand eased and Iran nuclear talks hit roadblocks. This delayed the return to Iranian crude oil supplies.

After settling 4.6% lower on Monday, futures were up 34 cents or 0.5% to $73.42/barrel at 0124 GMT. U.S. West Texas Intermediate crude rose 43 cents to $69.92 a bar, up 0.6% from the previous session.

Last week, oil prices fell because of concerns about vaccines being less effective against Omicron. This prompted fears that the governments might reimpose limitations to stop its spread and impact global growth.

A South African official of health reported that Omicron patients had shown only mild symptoms over the weekend. Anthony Fauci, the U.S. top infectious disease official has also said that it does not appear to be severe.

Analysts at ANZ stated in a note that this lowers the likelihood of oil market prices in the worst-case scenario over the last couple of weeks.

Saudi Arabia, which is the largest oil exporter in the world, increased its crude monthly prices Sunday as another indicator of optimism about oil demand. The Organization of the Petroleum Exporting Countries, along with their allies (known as OPEC+), agreed to increase output by 400,000 barrels each day for January despite the U.S. strategic oil reserves being released.

Prices were also helped by a delay in Iranian oil’s return. There have been roadblocks in the U.S.-Iran indirect nuclear talks. Germany called on Iran Monday to make realistic proposals during talks about its nuclear program.

Vivek Dhar, commodity analyst at Commonwealth Bank of Australia (OTC) stated in a note that while negotiations may still be successful when they resume later this week but markets might need to think about a longer delay to Iranian oil exports.

“That’s positive for oil prices and supports OPEC+ plans to boost oil production through 2022.”

Iraq expressed its optimism about higher demand, while oil and gas executives around the world warned that there was underinvestment in fossil fuels and that they would need to continue to use them despite global efforts for cleaner energy.

Edward Moya, an OANDA analyst said that it appeared the big oil price decline is over. He added in a note that support from the mid-$60s had provided solid support. However, this has been accompanied by a constant reminder of the fact that oil markets will continue to be vulnerable over the next few years.