DTN Oil

CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and the Brent crude contract on the Intercontinental Exchange registered hefty gains for a second session Tuesday, as the futures contracts retrace their steep decline in late November to early December.

Expectations for lower global oil production in 2022 by the Energy Information Administration than what the agency forecast in November offset a downward revision in world oil demand. Warm weather conditions in much of the United States through December joined by U.S. dollar strength capped the upside, however, with the U.S. and international crude benchmarks still down 8% from the session before the Nov. 26 selloff triggered by news of a fast moving and easily transmissible omicron variant of COVID-19.

NYMEX January West Texas Intermediate futures rallied $2.56 to a $72.05 barrel (bbl) settlement, although remains down $6.34 or 8.1% from Nov. 24. WTI futures dropped $15.96 or 20% in value from Nov. 24 to a $62.43 14-week low on the spot continuous chart on Dec. 2.

ICE February Brent futures settled Tuesday's session $2.36 higher at $75.44 bbl, while down $6.78 or 8.2% from Nov. 24, with the contract having plumbed a $65.72 14-week low on the spot continuous chart on Dec. 2, down $16.50 or 20% from Nov. 24.

For the gasoline contract, NYMEX January RBOB futures settled up 5.67 cents at $2.10 gallon Tuesday after sinking 46.3 cents or 19.8% from Nov. 24 to a $1.8799 better-than eight-month low on the spot continuous chart on Dec. 2. RBOB futures remains down 24.29 cents or 10.4% from the Nov. 24 $2.3429 gallon settlement, with seasonal weakness for gasoline limiting the upside.

NYMEX ULSD futures ended Tuesday's session with a 5.34 cents gain after settling at $2.2246 gallon, down 15.91 cents or 6.7% on a spot continuous basis from Nov. 24. ULSD futures fell to a $2.0069 14-week spot low on Dec. 2, down 37.68 cents or 15.8% from Nov. 24.

A combination of mobility restrictions in parts of Europe and Asia put in place amid spiking COVID-19 infections before the omicron variant hit the news were joined by new air travel restrictions in the United States and elsewhere in reaction to the new variant. While this sparked the selloff in an overbought market, the global oil market was already set to unwind some recent gains on a strengthening U.S. dollar and warm weather in the United States.

DTN forecasts warm weather for most of the United States over the next 15 days, including highs in the mid-60s Fahrenheit in Boston and New York City this weekend, while approaching the 70s in Philadelphia. The 15-day forecast does see brief bouts of cold weather interspersed with the warm weather pattern. DTN has identified a major change in the weather pattern during the 16- to 30-day period, with below-normal readings likely in the Plains and West, reaching central parts of the country in week four that could reach to the eastern part of the country.

Against this backdrop, EIA lowered its expectations for world oil production in 2022 by 490,000 barrels per day (bpd) to 100.93 million bpd from its outlook in November. The revision offset a 420,000 bpd downward adjustment in expected global oil consumption in 2022 to 100.46 million bpd.

Brian L. Milne can be reached at brian.milne@dtn.com