Oil settled at the highest level in nearly a month after U.S. crude stockpiles decreased and economic data pushed equities higher.

West Texas Intermediate futures rose 2.3%, closing above $72 for the first time in two weeks. Prices got a boost after the Energy Information Administration reported crude inventories declined 4.72 million barrels last week. Meanwhile, rising home sales and consumer confidence signaled economic strength, blunting worries about omicron’s impact.

“The report was modestly bullish, due to the large crude oil inventory drawdown,” said John Kilduff, a partner at Again Capital LLC. Though he cautioned crude oil inventories typically decline this time of year for tax avoidance purposes.

On the consumption side, the outlook is mixed. Gasoline stockpiles in the U.S. climbed as implied demand plunged nearly half a million barrels a day last week. The Chinese city of Xi’an is tightening its virus rules in a bid to curb an outbreak, local media reported, but so far the impact of omicron on global demand has been fairly limited.

However, an energy crunch in Europe and disruptions to supply from Libya and Nigeria added to bullish sentiment. Weakness in the dollar also lent support to oil. A weaker greenback makes oil less expensive for holders of other currencies.

Trading is starting to wane into the Christmas period. Average Brent crude futures volumes over the last 15 days are the least in two months, while WTI open interest has plunged to its lowest since 2016. “Holidays can be treacherous in the market,” said Phil Flynn, senior market analyst for Price Futures Group. “We have seen crazy moves on light volume.”

Winding Down

Oil is poised to cap a yearly gain following a rebound from the pandemic, but the rally has faltered over the past couple of months in part due to demand concerns after the emergence of omicron. There are some signs of softening consumption in Asia and the crude market’s structure has weakened significantly, indicating over-supply in the near term.

Europe’s energy crunch, meanwhile, has raised the prospect of greater demand for oil products in power generation. Natural gas prices surged after Russia curbed flows, forcing France to boost electricity imports and burn oil to keep the lights on. U.S. Gulf Coast refiners have also trimmed diesel shipments to Europe to prioritize domestic demand and buyers in Latin America.

In the short-term, geopolitical issues could provide some support to a rally in oil, most notably from tensions in Europe in response to Russia’s natural gas deliveries, said Flynn.

Prices:

West Texas Intermediate for February delivery settled $1.64 higher at $72.76 a barrel in New York

Brent for February settlement rose $1.31 to settle at $75.29, highest in two weeks