• WTI hit fresh monthly highs at $73.78 on Thursday, eclipsing the prior monthly highs at $73.30.
• Optimism that the hit to demand from Omicron won’t be as bad as initially feared continues to support prices.

Oil prices hit fresh monthly highs on Thursday, with front-month WTI futures rallying above prior monthly highs at $73.30 to reach $73.78, before backing off slightly to the $73.50 area. At current levels, WTI is up slightly more than 50 cents on the session putting it one course for a third consecutive positive close. If WTI does close out Thursday trade around $73.50, that would mean it has rallied a staggering $7.30 from earlier weekly lows just above $66.00.

As has been well documented at this point, the rally over the past three sessions has been spurred by positive Omicron/pandemic developments, including studies showing the new variant to be less severe and the US FDA approving highly effective Covid-19 treatment pills. The former development, coupled with a slowdown in the acceleration of the transmission rate in parts of Europe including the UK, has taken the pressure off of authorities to implement tougher economic restrictions.

Crude oil-specific factors have also helped; US inventories were revealed to have seen much larger than expected stock drawdowns last week. In other crude oil news that got less attention, the weekly US Baker Hughes rig count was released one day earlier than usual given tomorrow is a US market holiday. Oil and gas rigs rose to their highest level since April 2020 last week, a leading indicator of increased US output in the coming months.