WASHINGTON (DTN) -- Nearby delivery oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange rallied in early trade Monday after Saudi Aramco raised its official selling crude prices to Asia and the United States for the second consecutive month in January, signaling confidence in a demand recovery this winter. Early data on the omicron variant of coronavirus suggests the highly mutated strain is less lethal but more transmittable compared to the original COVID-19 virus.
Omicron variant is now found in more than 40 countries worldwide but there are no reported deaths related to the new strain of COVID-19, according to official data from the Word Health Organization. South African President Cyril Ramaphosa said this weekend the country is recording a rapid spread of omicron variant, but the rate of hospitalizations is lagging far behind the number of confirmed cases. Based on early indications, severity of a new COVID-19 strain is "a bit encouraging but more data is needed," said U.S. top infectious disease expert and White House advisor Anthony Fauci.
Domestically, at least 15 states have confirmed omicron on Sunday, including in the Northeast, the South, the Great Plains, and the West Coast. Delta variant of coronavirus remains the dominant variant, making up more than 99% of cases and driving a surge of hospitalizations in the north.
Oil futures early gains came on the back of Saudi Aramco's latest price move, where the world's top oil exporter raised its prices for crude oil bound to Asian and U.S. buyers for the second month in a row. The biggest price increases were for medium and heavy grades to Asian buyers.
Aramco boosted its medium grade to Asia by 70 cents to a $3.05 barrel (bbl) premium over Oman/Dubai and its heavy grade by 80 cents bbl to a $1.80 bbl premium. Super light was raised by 30 cents bbl to a $6.15 bbl premium while extra light was increased to a $4.50 bbl premium.
For U.S.-bound crudes, Aramco boosted its extra light OSP by 60 cents bbl to a $3.50 bbl premium.
Higher premiums can be viewed as a sign of robust demand, supporting last week's decision by the Organization of the Petroleum Exporting Countries and their allies to raise oil production by 400,000 barrels per day (bpd) in January in spite of concerns related to the Omicron variant.
OPEC+ said they are ready to reconvene at any point should demand outlook deteriorate due to the new variant. OPEC+ currently withholds about 3.8 million bpd from the global market, while gradually unwinding those cuts through monthly installment of 400,000 bpd.
Despite upbeat demand signals, OPEC+'s technical panel estimated the oil market is rapidly moving into oversupply next year, with gains in production seen outpacing demand by 2 million bpd next month and widening further to 3.4 million bpd in February. In March, OPEC+ expects a surplus on the global market to reach a whopping 3.8 million bpd.
Near 7:30 a.m. EST, West Texas Intermediate January futures rallied more than $2 bbl to trade near $68.38 bbl and the international benchmark ICE February Brent contract jumped above $72 bbl, up $2.30 bbl in early trading. NYMEX RBOB January futures added 4.85 cents or 2.5% to $2.0014 gallon, and the front-month NYMEX ULSD contract strengthened to $2.1466 gallon.
Liubov Georges can be reached at email@example.com