Oil prices eased on Wednesday, taking a breather after gains earlier this week, as investors waited for more information on to what extent the Omicron coronavirus variant will likely hurt the global economy and fuel demand.
Brent crude futures dropped 40 cents, or 0.5%, to $75.04 a barrel at 0748 GMT, after settling 3.2% higher on Tuesday. U.S. West Texas Intermediate crude was at $71.50 a barrel, down 55 cents or 0.8% having gained 3.7% in the previous session.
After a collapse last week, oil prices rebounded earlier this week on rising optimism that Omicron will not cause major economic damage.
"The recovery run took a break as investors tried to confirm full impact of the Omicron variant before buying further," said Satoru Yoshida, a commodity analyst with Rakuten Securities.
The Omicron variant can partially evade the protection from two doses of Pfizer (NYSE:PFE) and partner BioNTech's COVID-19 vaccine, the research head of a laboratory at the Africa Health Research Institute in South Africa said on Tuesday.
"Investors are still not fully optimistic and are taking a wait-and-see approach for now," said Hiroyuki Kikukawa, general manager of research at Nissan (OTC:NSANY) Securities.
The market is also focusing on Iran nuclear talks, tensions between Russia and Ukraine and weather in northern-hemisphere winter, he added.
Indirect talks between Washington and Tehran on reinstating their nuclear pact resumed a week ago but broke off on Friday, with a resumption scheduled for later this week, as Western officials voiced dismay at sweeping Iranian demands.
Germany wants Iran to present realistic proposals in talks over its nuclear programme.
Meanwhile, President Joe Biden warned Russian President Vladimir Putin on Tuesday that the West would impose "strong economic and other measures" on Russia if it invades Ukraine, while Putin demanded guarantees that NATO would not expand farther eastward.
Biden warned Putin he could face stiff economic sanctions, the disruption of the Nord Stream 2 gas pipeline to Europe, and that the United States and European allies would provide additional defensive capabilities to Ukraine.
Oil markets reacted little to U.S. weekly inventory data.
U.S. crude stocks fell last week while gasoline and distillate inventories rose, according to market sources citing American Petroleum Institute figures on Tuesday.
Analysts polled by Reuters forecast U.S. crude inventory data would show a second straight weekly decline.