Working oil pumps against a sunset sky. (Getty Images)

Oil prices increased on Wednesday over worries about tight supply and a drawdown in US inventories, in spite of concerns about the possible hit to economic activity from the spread of the Omicron coronavirus variant.

US inventories went down more than expected, with crude stocks falling by 4.7 million barrels, although that is in part because of year-end tax considerations that discourage companies from storing crude barrels.

While Brent crude futures ended the day up $1.31, or 1.8%, to $75.29 a barrel, US West Texas Intermediate (WTI) crude futures rose $1.64, or 2.3%, to settle at $72.76 per barrel.

We saw a drop in production, we saw inventories and crude fall, so that’s giving the market a supportive outlook, said Phil Flynn, senior analyst at Price Futures Group in Chicago. Because supplies are below average across the board, there’s not a lot of room for error.

Meanwhile, gasoline storage increased dramatically in the most recent week, fanning worries that US travelers were abruptly changing plans, potentially hurting demand in the world’s largest gasoline consumer.

The country’s gasoline stockpiles went up by 5.53 million barrels last week, according to the Energy Information Administration. Crude stockpiles at the main storage hub of Cushing expanded by 1.46 million barrels, going up for a sixth week.

Covid is killing demand for gasoline in just a week - people driving is just not happening, said Bob Yawger, director of energy futures at Mizuho Securities.

Coronavirus-driven mobility curbs across the world added to fears of a decrease in fuel demand. Germany, Ireland, the Netherlands and South Korea are among countries that have reimposed partial or full lockdowns or other social distancing measures recently.

It still remains unclear whether the Omicron variant is more deadly than Delta. A study from South Africa showed the virus was less likely to send people to the hospital than Delta as governments around the globe try to contain the rapid spread of the variant.

The oil market’s rally might also be buoyed in part by European utilities switching their power source to heating oil from natural gas because of record-high prices on the continent.

What we’re seeing in natural gas in Europe is going to lead to sustained switching from natgas to oil to generate power, said Andrew Lipow of Lipow Oil Associates in Houston. That’s unanticipated demand that’s going to persist through the next several months.