Oil prices sit tight, tracking biggest weekly gain since late August

Oil prices drifted in a narrow range on Friday, on track to their biggest weekly gain since late August, as the easing concerns over the Omicron coronavirus variant on global growth and fuel demand drove market sentiment.

Benchmark Brent and WTI were both on course to rise more than 6% this week, even after a brief profit-taking, their first weekly gain in seven weeks.

U.S. West Texas Intermediate (WTI) crude futures gained 2 cents, or 0.03%, to $70.96 a barrel at 0419 GMT, after sliding 2% in a volatile session the previous day.

Brent crude futures slipped 6 cents to $74.36 a barrel after falling 1.9% on Thursday.

 

Earlier in the week, the oil market had recovered about half the losses it suffered since the Omicron outbreak on Nov. 25 as early studies suggest getting three doses of Pfizer's PFE.N vaccine offers protection against the Omicron variant.

"Fears of Omicron are subsiding... and appetite for risk is returning," said Howie Lee, an economist from OCBC Bank, adding that as oil was heavily sold off in he last two weeks, there might be bargain hunters attempting to scoop up deals now.

But Lee warns that the market is not out of the woods yet and there is still some lingering concern on whether the Omicron variant may push border movement restrictions during the festive season.

Prices are under pressure as China's domestic air traffic, once the world's envy after a fast rebound during the pandemic, is faltering amid a zero-COVID policy that has led to tighter travel rules in Beijing and weaker consumer confidence after repeated small outbreaks.

Meanwhile, ratings agency Fitch downgraded property developers China Evergrande Group and Kaisa Group, saying they had defaulted on offshore bonds.

That reinforced fears of a potential slowdown in China's property sector, as well as the broader economy of the world's biggest oil importer.

In addition, headlines about a Japanese study showing Omicron is more than four times as transmissible as the Delta variant also sparked some selling, OANDA analyst Jeffrey Halley said.

"Oil's had a massive run - it was an excuse for some of the short-term money to lock in some profits," Halley said.

A stronger dollar, rising ahead of U.S. inflation data due later on Friday, also weighed on oil prices. Oil typically falls when the dollar firms as it makes oil more expensive for those holding other currencies.

The inflation figures are expected to lead to a push for a U.S. rate hike as early as March 2022.

 

(Reporting by Sonali Paul in Melbourne and Muyu Xu in Beijing; editing by Richard Pullin and Gerry Doyle)