DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Friday's session sharply higher, lifting both crude benchmarks as much as 2% higher. The gains came amid early signs that omicron infections are leveling off in U.S. cities where the new variant hit first, suggesting a national peak may be approaching, while broader commodities also got a lift from a weekly decline in the U.S. dollar.

The wave of omicron cases in the United States that has disrupted everything from flights to schools over the past month is likely to fade fast in the coming weeks, according to some public health officials. Former Food and Drug Administration Commissioner Scott Gottlieb told reporters, "It's peaking right now. If you look at the epidemiology on the East Coast, certainly ... you're seeing cases come down week over week."

Some of the most populous U.S. states, including New York, Florida and California saw a 10% decline in new COVID-19 cases over the past week.

"The way down for the omicron wave looks a lot like the way up. We've seen this before," Gottlieb said. "And so, it took us three weeks to get to the peak. It's going to take us three weeks to get all the way down."

A University of Washington model suggests the number of daily reported cases in the United States will top out at 1.2 million by Jan. 19 and then fall sharply, "simply because everybody who could be infected will be infected," said Ali Mokdad, a professor of health metrics sciences at the university.

Oil traders pay close attention to pandemic trends as they correlate very closely with gasoline demand in the United States. During the first week of January, gasoline supplied to the U.S. market plunged to the lowest rate since February 2021 at 7.9 million barrels per day (bpd) amid widespread worker absenteeism and shuttered schools. As a result, gasoline stockpiles built by more than 8 million barrels (bbl) in the reviewed week after surging 10 million bbl in the final week of December.

Mobility across the largest cities in the United States declined markedly over the past 12 days as an omicron-led surge in COVID-19 infections rippled through the country, prompting shutdowns of schools and employee absenteeism. Apple mobility data shows that in cities like New York and Chicago driving plunged by more than 40% since the emergence of the Omicron variant in late November. Restaurant reservations across the United States remained in negative territory each day so far this year, averaging 28% below the pre-pandemic level.

On the economic calendar Friday, U.S. retail sales for December disappointed with 1.9% drop in December, missing market expectations for an unchanged showing, according to data released by the U.S. Census Bureau. This marked the first month-on-month decline in retail sales since July 2021.

U.S. consumer sentiment, meanwhile, dropped 2.5% in early January to 68.8%, according to data released this morning by the University of Michigan. Economists were mostly expecting a stronger reading of 70.4%.

"The sentiment index fell to the second-lowest level in a decade, which was recorded in November (67.4). It has averaged just 70.3 in the past six months, whereas in the first six months of 2021 it averaged 82.9," said Surveys of Consumers chief economist Richard Curtin. "While the delta and omicron variants certainly contributed to this downward shift, the decline was also due to an escalating inflation rate."

Economists have long suggested that the recent drop-off in consumer sentiment was bound to undermine consumer spending, noting that other sentiment measures were above early pandemic lows. Several factors have fueled the slowdown. Americans aren't enjoying the same stimulus support they did in early 2021, and it's probable that much of the savings built up during lockdowns have been depleted.

On the session, West Texas Intermediate futures for February delivery advanced $1.70 to $83.82 per bbl, and ICE March Brent crude crested over $86 per bbl, up $1.59 on the session. NYMEX February RBOB futures rallied 3.49 cents or 1.7% to $2.4190 gallon, and the front-month ULSD contract gained 2.58 cents to $2.6343 gallon. U.S. dollar index firmed to 95.150 at settlement following a three-session losing streak, reversing off a 94.610 nine-week low overnight after finding buying support at the 100-day moving average.

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

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