WASHINGTON (DTN) -- In early activity on the first trading day of 2022, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange powered higher, lifting the international benchmark above $78 per barrel (bbl) amid reports suggesting Organization of the Petroleum Exporting Countries and Russia-led partners expect the omicron-led disruption to global oil demand to be isolated to the first quarter amid better mitigation efforts to soften the pandemic's impact on the economy and public life.
Oil complex kicked off 2022 on firm footing despite ongoing challenges surrounding the fast-paced spread of the Omicron variant over the holiday weekend. U.S. airlines cancelled more than 2,000 flights on Saturday and Sunday, bringing the total cancellations over the past ten days to nearly 14,000 due to shortfalls in staffing crews and severe winter weather in parts of the country. Flight data published by Transportation Security Administration showed 1,616,316 passengers were able to pass through domestic airports on the first day of 2022 -- about 30% below pre-pandemic levels.
Some airlines have turned to temporary salary bumps to incentivize workers and alleviate labor shortages. United Airlines said pilots will be eligible for triple pay for extra unstaffed flights they pick up through Jan. 29.
Fueling labor shortages is the rampant spread of the new COVID-19 variant announced in late November that appears to be less lethal but more transmittable compared with previous strains. The United States recorded more than 400,000 new daily COVID infections over the holiday weekend, shattering the previous record. The same trendline is seen across European Union where new infections set daily records in the United Kingdom, France, and Italy, although hospitalizations have not yet shown a marked increase.
Despite this backdrop, OPEC+ is reported to be optimistic about a demand recovery in 2022 with the group's technical panel releasing a document showing the Omicron impact is likely to be short-lived.
Manufacturing and service sectors across advanced and emerging economies have effectively weathered the previous waves of COVID-19 pandemic, with the public less likely to pullback on economic activity the way it did during the first outbreak. Additionally, U.S. and European governments rolled-out vigorous booster programs and at-home rapid testing that should help elevate the pressure on hospitals.
That is one of the many reasons why OPEC+ is expected to increase production by 400,000 barrels per day (bpd) next month in line with the previously agreed quotas. The group meets on Tuesday (Jan. 4).
On the economic calendar Monday, European manufacturing data for December showed a surprise easing in global supply chain crisis with EU's inventories rising at the fastest rate over the past 24 years.
"We're seeing some tentative, but very welcome signs that the supply chain disruption which has plagued production lines all across Europe is beginning to recede. Although what gains to be had were only marginal, with shortages, port congestion and transport issues still at large, PMI data showed stocks of purchases rising at a survey-record rate in December," said the survey's Senior Economist Joe Hayes.
The IHS Markit Eurozone Manufacturing PMI still fell slightly in December to 58, down from 58.4 in November and to its lowest reading in ten months. Sector data revealed that consumer goods makers drove the slower improvement in manufacturing conditions, with intermediate and capital goods producers registering
marginally quicker upturns.
In early trade, West Texas Intermediate February futures advanced $0.26 to trade near $75.47 bbl and March Brent gained $0.41 to near $78.19 bbl. NYMEX February RBOB futures rallied 1.5 cents to $2.2396 gallon, with the new front-month ULSD contract adding 1.95 cents to $2.3448 gallon.
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