Mr. Sriram Iyer, Senior Research Analyst at Reliance Securities
International and domestic oil prices remained extremely range bound this week.
Prices started weaker in the early part of the week as surging cases of the Omicron coronavirus variant raised fears that new restrictions may hit fuel demand.
In fact, prices on the overseas market fell more than 5% in a single session and was a knee-jerk reaction to the spread of the virus and the fear that lockdowns will be imposed by several governments.
Messages of caution and warnings of a worsening COVID wave were starting to ring louder with the approach of the year-end holiday season, dampening market sentiment.
Additionally, Reuters reported that OPEC+ compliance with oil production cuts stood at 117% in November, up 1 percentage point from the previous month, indicating the group's production levels continue to be below agreed targets.
However, after the initial fall prices recovered from the lows of the week lifted by a larger than expected drawdown in U.S. inventories and on signs that the worst effects of the Omicron variant might be more containable than previously feared.
Data showed Crude inventories fell by 4.7 million barrels in the week to Dec. 17 to 423.6 million barrels, compared with expectations for a 2.7-million-barrel drop.
Meanwhile, tracking crude oil prices, gasoline and heating oil futures also rose this week shrugging off a rise in inventories.
Gasoline stocks rose more than anticipated, with a build of 5.5 million barrels, while distillate stockpiles rose 396,000 barrels in the week.
The oil market's rally may also be buoyed in part by European utilities switching their power source to heating oil from natural gas due to record-high prices on the continent and after Russia curbed flows on natural gas to Europe.
Prices could remain choppy in the coming week.
Volumes could be light ahead of Christmas holiday weekend and New Year weekend next week.
Markets could also get a lift as fears receded after the Omicron variant which is more transmissible than previous coronavirus variants, but early data suggests it causes a milder level of illness.
So, lockdowns and restrictions will be in place, but the death rate may be lower than the previous variants, which in a way could be a positive for the market.
Technically, Brent Oil futures support zone is at $71.75-$69.20 levels. Resistance zone is at $76.95-$79.45 levels.
Technically, Crude Oil WTI support zone is at $68.65-$66.06 levels. Resistance zone is at $76.45-$77.80 levels.
Domestically, MCX Crude Oil January support zone is at 5,190-5,020 levels. Resistance zone is at 5,700-5,800 levels.