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Oil heads for biggest yearly gains since 2009

THE STRAITS TIMES – Oil prices slid yesterday but were set to post their biggest annual gains in 12 years, spurred by the global economic recovery from the COVID-19 slump and producer restraint, even as infections surged to record highs around the world.

Brent crude futures fell 31 cents, or 0.4 per cent, to USD79.22 a barrel at 0427 GMT, while United States (US) West Texas Intermediate (WTI) crude futures dropped 37 cents, or 0.5 per cent, to USD76.62 a barrel.

Brent is on track to end the year up 53 per cent, while WTI is heading for a 57 per cent gain, the strongest performance for the two benchmark contracts since 2009, when prices soared more than 70 per cent.

Both contracts touched their 2021 peak in October with Brent at USD86.70 a barrel, the highest since 2018, and WTI at USD85.41 a barrel, the loftiest since 2014.

Global oil prices are expected to rise further next year as jet fuel demand catches up.

The sun sets behind a pumpjack in Odessa, Texas. PHOTO: AP

“We’ve had Delta and Omicron and all manner of lockdowns and travel restrictions, but demand for oil has remained relatively firm. You can attribute that to the effects of stimulus supporting demand and restrictions on supply,” said CommSec chief economist Craig James.

US health experts warned Americans to prepare for severe disruptions in coming weeks, with infection rates likely to worsen amid increased holiday travel, New Year celebrations and school re-openings following winter breaks.

With oil hovering near USD80, James said he expects the Organisation of the Petroleum Exporting Countries, Russia and allies, together called OPEC+, to stick to their plan to add 400,000 barrels per day of supply each month when they meet on January 4, as they continue to wind back sharp production cuts implemented in 2020.

“I think we will see a lot of pressure on OPEC+ to make sure there’s enough oil being supplied to market,” James said.

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