(Bloomberg). Oil reached its highest point in almost a month, after stocks fell and economic data drove equities higher.

West Texas Intermediate futures were up 2.3% to close above $72 for only the second time in 2 weeks. The Energy Information Administration’s report that crude inventories fell 4.72 million barrels last Wednesday gave prices a lift. Meanwhile, rising home sales and consumer confidence signaled economic strength, blunting worries about omicron’s impact. 

“The report was modestly bullish, due to the large crude oil inventory drawdown,” said John Kilduff, a partner at Again Capital LLC. However, he warned that oil inventories tend to decline around this time every year in order to tax avoidance.

The outlook for consumption is uncertain. The U.S. saw an increase in gasoline stocks as the implied demand fell to nearly half of a million barrels per hour last week. The Chinese city of Xi’an is tightening its virus rules in a bid to curb an outbreak, local media reported, but so far the impact of omicron on global demand has been fairly limited. 

Bullish sentiment increased due to a European energy shortage and problems with supply from Libya, Nigeria and Libya. Oil was also supported by weakness in the dollar. Oil becomes less costly for those who hold other currencies if the greenback is weaker.   

Trades are beginning to slow down in the Christmas period. Over the last fifteen days, average futures volumes have fallen by half a million dollars in just two months. WTI open rates are at their lowest point since 2016. “Holidays can be treacherous in the market,” said Phil Flynn, senior market analyst for Price Futures Group. “We have seen crazy moves on light volume.”

Oil’s Black Friday: Algos and Options Turn a Tumble Into a Crash

Although oil looks poised for a modest increase in annual gains following a rebound after the pandemics, the rally has stalled over the last couple of months partly due to concern about the demand response to omicron. There are some signs of softening consumption in Asia and the crude market’s structure has weakened significantly, indicating over-supply in the near term.

Europe’s energy crunch, meanwhile, has raised the prospect of greater demand for oil products in power generation. Russia’s curtailed natural gas flow, causing prices to soar. France had to import more electricity and use oil to power its lights. To prioritize Latin American demand, U.S. Gulf Coast refiners cut diesel exports to Europe.

In the short-term, geopolitical issues could provide some support to a rally in oil, most notably from tensions in Europe in response to Russia’s deliveries, said Flynn.

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