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Oil prices maintain rally as Omicron concerns ease

By Neil Dennis

08:11, 7 December 2021

Oil derricks at sunset
Prices move higher as fears subside – Photo: Shutterstock

Oil prices maintained upward momentum on Tuesday, with US benchmark crude joining European Brent crude above the $70-a-barrel mark as fears over the severity of the Omicron variant of coronavirus continued to ease.

US West Texas Intermediate climbed 1.7% to $70.70 a barrel in early London trade, while Brent gained 1.6% to $74.25 a barrel.

“Fears around how the Omicron variant could spark a fresh bout of global lockdowns are slowly easing,” said Joshua Mahony, senior market analyst at IG.

He added: “Reports from Gauteng province in South Africa provided on-the-ground information that backs up claims that this variant is more mild in nature.”

Turbulent markets

Oil prices have suffered a turbulent couple of weeks as Europe battled with the fourth wave of infections and then news of the new Omicron variant emerged. Brent fell by as much as 20% in six trading sessions between 24 November and 2 December – falling to a three-month low of $65.72 last week.

Oil - Brent

79.15 Price
-1.620% 1D Chg, %
Long position overnight fee 0.0010%
Short position overnight fee -0.0229%
Overnight fee time 22:00 (UTC)
Spread 0.045

Oil - Crude

74.50 Price
-1.560% 1D Chg, %
Long position overnight fee -0.0136%
Short position overnight fee -0.0083%
Overnight fee time 22:00 (UTC)
Spread 0.040


25.49 Price
+0.890% 1D Chg, %
Long position overnight fee -0.0200%
Short position overnight fee 0.0118%
Overnight fee time 22:00 (UTC)
Spread 0.020

Natural Gas

2.77 Price
-1.140% 1D Chg, %
Long position overnight fee 0.0451%
Short position overnight fee -0.0670%
Overnight fee time 22:00 (UTC)
Spread 0.0050

Trading positioning data for the previous week showed that net long positions – speculating on price increases – fell by 44,654 lots, driven almost entirely by liquidated long contracts – meaning few speculators were increasing short positions to bet on further price losses.

Profit taking

Warren Patterson, head of commodities strategy at ING, suggested that the severity of the sell-off may have been exacerbated by profit taking.

“The flushing out of longs leaves the door open for speculators to come back into the market at these lower levels,” he said.

Indeed, prices began to rebound at the end of last week and rallied again by 5% on Monday, followed by Tuesday’s gains to build Brent’s gains to nearly 13% since the lows of last week.

Read more: Oil price analysis: will WTI break below again?

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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