By Barani Krishnan

Investing.com – Oil rallied for a second day in a row Wednesday after data showing a sharp drop in weekly stockpiles of U.S. crude allowed bulls in the market to claw back all they lost in Monday’s sell-off triggered by fears over Covid’s Omicron variant.

Oil was also supported by production problems in Libya, which forced North Africa’s country to declare force majeure for crude oil exports out of two ports.

, the benchmark for U.S. crude, settled up $1.64, or 2.3%, at $72.76 a barrel, adding to Tuesday’s 4% gain. The two-day rally helped WTI to recover all of Monday’s 3.7% drop. 

London-traded , the global benchmark for oil, was up $1.51, or 2%, at $75.47 a barrel by 2:43 PM ET (19:43 GMT), after Tuesday’s rise of 3.4%. On Monday, Brent lost 2.7%.

According to the Energy Information Administration, U.S. crude inventories decreased by 4.72 million barrels over the week ended Dec. 17. This was the biggest weekly crude draw since September, and it added to the 4.58 million slide the week before Dec. 10.

Investing.com has tracked the industry and forecast a decrease of around 2.5million barrels last week.

However, gasoline stockpiles rose more than crude oil’s drop.

The gasoline inventory rose to 5.53 billion barrels last week. This is their highest level since the 7.5-million barrel increase in June 7.

Analysts predicted that gasoline inventories would increase by 65,000 barrels over the past week. However, the EIA’s report was at least eight times greater than the projections. Over the week before, gasoline inventories fell by 719,000 barrels.

EIA also reported that distillates were used to make diesel and other fuels rose by 396,00 barrels, compared with a predicted drop of 250,000. The previous week saw a decline in distillate stocks by 2.85million.

But it was the huge gasoline build that raised eyebrows among some traders who attributed it to the likely slump in fuel demand amid last week’s breakout in Omicron cases across major U.S. cities.

“It’s really quite stunning to see this build in gasoline and the drop in fuel demand that it suggested for last week and how that’s correlating with the spike in Omicron caseloads,” said John Kilduff, founding partner at Again Capital, an energy hedge fund in New York.

According to the Centers for Disease Control and Prevention, the Omicron strain is the most prevalent COVID in America. It was responsible for 73% of all new cases of coronavirus last week. 

New York City, Los Angeles, and Chicago have all announced massive cuts in their activity, and implemented new restrictions to combat the risk of this variant. President Joe Biden has also warned that Americans who do not get vaccinated against the virus face “a winter of severe illness and death”.

Oil prices have fallen from 2021’s highs since the emergence of the Omicron variant in November. 

Brent plunged from $86.70/barrel in mid-October, a record high for the year, to $65.80 per barrel over the next two months. Then it settled into an average range between $71 and $75.

Global oil producers are reducing the Omicron risk despite the current price slump and the threat of an resurgence.

OPEC+ — a 23-nation oil producing alliance led by the 13-member OPEC under Saudi Arabia and 10 others non-OPEC countries steered by Russia — Omicron is unlikely to become as disruptive to energy demand as the original Covid-19 strain that broke out in 2020.