Oil slips by more than 1% on rising supply, Omicron

Oil prices fell for a third day straight on Wednesday on growing signs that supply growth will outpace demand next year, and as the World Health Organization said COVID-19 vaccines may be less effective against the Omicron variant

Brent crude futures fell 78 cents, or 1.1%, to $72.92 a barrel, after losing 69 cents on Tuesday

U.S. West Texas Intermediate (WTI) crude futures fell 85 cents, or 1.2%, to $69.88 a barrel, after losing 56 cents in the previous session

The front-month Brent contract is trading at a small premium to the second month , after trading briefly at a small discount on Tuesday, a market structure known as contango

“Widespread restrictions will be the recipe for further gloom leading to continuous weakness and dealing with contango in the oil market in the next month or two has now become a possibility,” Tamas Varga of oil brokerage PVM said

Norway earlier this week tightened restrictions to stem the spread of Omicron

The WHO on Wednesday said preliminary evidence indicates vaccines may be less effective against infection and transmission linked to the Omicron coronavirus variant, which also carries a higher risk of reinfection

The International Energy Agency (IEA) on Tuesday said a surge in COVID-19 cases with the emergence of the Omicron variant will dent global demand for oil at the same time that crude output is set to increase, especially in the United States, with supply set to exceed demand through at least the end of next year

In contrast, the Organization of the Petroleum Exporting (OPEC) on Monday raised its world oil demand forecast for the first quarter of 2022

In another bearish indicator, industry data showed that U.S. crude inventories last week did not decline as much as expected

American Petroleum Institute data showed U.S. crude stocks fell by 815,000 barrels in the week ended Dec. 10, according to market sources, compared with a 2.1 million barrel drop that 10 analysts polled by Reuters had expected

However, distillate stocks fell by 1 million barrels, compared with analysts’ forecasts for an increase of 700,000 barrels, and gasoline stocks rose by 426,000 barrels, which was a smaller build than expected