Oil prices head for biggest annual gains since at least 2016 on economic recovery

Oil prices fell on Friday but were set to post their biggest annual gains since at least 2016, 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 $1.01, or 1.3 percent, to $78.52 a barrel at 1201 GMT, while US West Texas Intermediate (WTI) crude futures dropped $1.12, or 1.5 percent, to $75.87 a barrel.

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Brent is on track to end the year up nearly 52 percent, its biggest gain since 2016, while WTI is heading for a 56.5 percent gain, the strongest performance for benchmark contract since 2009, when prices soared more than 70 percent. Both contracts touched their 2021 peak in October with Brent at $86.70 a barrel, the highest since 2018, and WTI at $85.41 a barrel, the highest since 2014.

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

“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 Australian brokerage firm CommSec’s Chief Economist Craig James.

However, after rising for several straight days, oil prices stalled on Friday as COVID-19 cases soared to new pandemic highs across the globe, from Australia to the United States, stoked by the highly transmissible Omicron coronavirus variant.

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 reopenings following winter breaks.

Easing production outages in Nigeria and Ecuador weighed on prices.

Ecuador’s heavy-crude oil pipeline will restart pumping on Dec. 31 following maintenance, crude transport company OCP Ecuador said earlier this week.

Royal Dutch Shell resumed oil flows from Nigeria's Forcados terminal on Wednesday.

With oil hovering near $80, the Organization of the Petroleum Exporting Countries, Russia, and allies, together called OPEC+, will probably stick to their plan to add 400,000 barrels per day of supply in February when they meet on Jan. 4, four sources said.

Read more: OPEC raises 2022 oil demand forecast, says omicron variant impact to be mild