DTN Oil

WASHINGTON (DTN) -- Reversing early morning losses, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange rallied to one-month highs on Monday. Futures found buying support from expectations for demand growth in 2022 amid ongoing economic strength while what is known as the year-end "Santa Claus" rally in financial markets offset some concerns over the rapid spread of the omicron COVID variant across major oil-consuming economies.

The "Santa Claus" rally refers to the final five trading days of the current year and first two trading days of the new year when equities have traditionally rallied. In addition to the historical trend, U.S. stock indexes rose sharply on Monday as investors looked at fresh data from Mastercard's SpendingPulse report that found holiday sales from Nov. 1 through Dec. 24 surged 8.5% year-on-year -- the fastest pace in 17 years.

"Consumers splurged throughout the season, with apparel and department stores experiencing strong growth as shoppers sought to put their best-dressed foot forward," said Steve Sadove, senior adviser for Mastercard and former CEO and chairman of Saks Incorporated.

Strong sales came despite ongoing headwinds including supply chain disruptions and growing inflationary pressures joined by the spread of Omicron in December. United States recorded 189,000 new COVID-19 infections on Christmas Day -- the highest since January.

Among latest disruptions from Omicron, U.S. airlines canceled more than 1,800 flights over the holiday weekend because of personnel shortages linked to a spike in cases of the new variant. Real-time flight tracking data from FlightAware showed 951 flights to and from the United States canceled as of Saturday, Dec. 25, afternoon. Delta listed 309 flight cancellations, United had 240, Jet Blue had 123 and American Airlines had 92. The cancellations stoked concerns over demand implications from the Omicron surge as consumers retreat to the safety of their homes and governments renew quarantine restrictions.

Still, some analysts believe that the new variant will be successfully mitigated by the vaccines and the rollout of booster shots. In a note to clients Monday, J&P Morgan said, "We do not expect Omicron to impact the growth outlook in any significant way, but rather it is likely to accelerate the end of the pandemic."

Also on Monday, oil traders monitored the start of multilateral nuclear talks in Vienna after Iran's negotiators adjourned talks for further consultations with officials in Tehran. Wire services reported Iran's chief negotiator, Ali Bagheri, insisted today that the United States and Western allies guarantee free flow of crude oil exports as a precondition for any agreement. Previous rounds saw similar demands made by Tehran that went unfulfilled.

"The most important issue for us is to reach a point where, firstly, Iranian oil can be sold easily and without hindrance," Foreign Minister Hossein Amirabdollahian was quoted as saying by state media. "The money from the oil is to be deposited as foreign currency in Iranian banks -- so we can enjoy all the economic benefits stipulated in [the] Joint Comprehensive Plan of Action."

U.S. sanctions have slashed Iran's oil exports -- the country's main revenue source -- from about 2.8 million barrels per day (bpd) in 2018 to as low as 200,000 bpd in late 2020. Reuters survey pegged Iran's oil exports at 600,000 bpd in June.

At settlement, NYMEX February West Texas Intermediate futures advanced $1.78 to $75.57 per barrel (bbl), with gains accelerating post-settlement, and the front-month Brent crude rallied $2.46 for a $78.60-per-bbl settlement. NYMEX January RBOB futures surged 2.78 cents to $2.2339 gallon, and the January ULSD contract gained 2.21 cents to $2.3535 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com