Risk sentiment soared, API crude plunged 3 million barrels, U.S. oil rose more than 3%

On Tuesday (December 7), Brent oil rose 3% to close at $75.
28 / barrel, and once saw an intraday high of 76.
27
.
Preliminary data show that the increase in Omicron cases has so far not overwhelmed hospitals, and there is little evidence that global oil consumption has been hit significantly, and oil prices continue to rebound
sharply in the previous session.

U.
S.
stocks posted a release gain, with the S&P 500 jumping 2.
2% to its highest level
since late November.
Oil prices continued to climb as optimistic expectations that the new strain might not be as severe eased investors' concerns
about the demand outlook.
Preliminary data shows that the increase in Omicron cases has so far not overwhelmed hospitals, and there is little evidence that global oil consumption has taken a major hit
.

Phil Flynn, senior market analyst at Price Futures Group Inc.
, said that while Omicron has the potential to disrupt some demand, the market pricing situation is much
worse than it may be.
We are returning from the fundamentals we feared last week to more real fundamentals
.
Some oil analysts believe the plunge in oil prices in recent weeks has been driven by low liquidity and the so-called negative gamma effect, which refers to options traders being forced to sell futures contracts to hedge risk
.
When prices rise like in recent days, these traders tend to buy back futures that were previously sold, fueling the rally
further.

TACenergy analysts wrote in a client note that energy and stock markets rose for the second day in a row, and volatility indices are moving lower
as Omicron concerns appear to be fading.
Gary Cunningham, head of market research at Tradition Energy, said the market was oversold as a knee-jerk reaction to
the Omicron variant and its possible spread and impact on travel restrictions.
Now, we see the market resuming expectations
of strong demand over the next 6-12 months.

Oil prices
were also supported by delays in entering the market as indirect nuclear talks between the U.
S.
and Iran hit a roadblock.
On Monday, Germany urged Iran to come up with realistic proposals
in talks about its nuclear program.
Royal Bank of Canada analyst Helima Croft said in the report that tensions between the United States and Russia and Iran have risen, and the energy market is vulnerable to harsh winter weather
.
The prospect of a deal to lift sanctions on Iran's more than 1 million b/d oil exports is bleak, and the country is now one of the biggest upside geopolitical risks in the
oil market.

According to the EIA's monthly short-term energy outlook, WTI crude oil prices are expected to be $67.
87/barrel in 2021 and Brent crude oil prices are expected to be $70.
60/barrel in 2021, down nearly $2 from last month, and travel restrictions
are triggered by new variants.
On the supply side, U.
S.
crude oil production is expected to be 11.
18 million b/d in 2021, compared with 11.
13 million b/d previously expected; U.
S.
crude oil production is expected to be 11.
85 million b/d in 2022, compared with 11.
9 million b/d
previously expected.
U.
S.
oil production is expected to grow by about 750,000 b/d next year, U.
S.
shale oil production will plateau until around 2023, and U.
S.
oil production may reach pre-pandemic levels
within three years.

On the demand side, U.
S.
crude oil demand is expected to grow by 1.
58 million b/d in 2021, compared with 1.
49 million b/d previously; U.
S.
crude demand is expected to grow by 700,000 b/d in 2022, compared with 690,000 b/d
previously.
Global crude oil demand growth is expected to be 5.
1 million b/d in 2021 and 3.
55 million b/d
in 2022.

Crude inventories fell by 3.
089 million barrels, refined oil increased by 1.
228 million barrels, gasoline inventories increased by 3.
705 million barrels and Cushing crude inventories increased by 2.
395 million barrels
in the week ended Dec.
3, according to inventory data released by the American Petroleum Institute.