Oil trades at 2-month high, boosted by optimism over economy

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Oil futures hit a two-month high on Wednesday as traders appeared upbeat on the economic outlook on expectations that the omicron wave of COVID-19 will have little impact on demand.

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West Texas Intermediate Crude for February Delivery CL00,
+1.12%

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clg22,
+1.12%
It rose 89 cents, or 1.1%, to $82.11 a barrel on the New York Mercantile Exchange, trading at its highest intraday level since Nov. 11. March Brent Crude BRN00,
+0.75%

BRNH22,
+0.75%,
The global benchmark, ICE Futures Europe, was up 60 cents, or 0.7%, at $84.32 a barrel, after trading at its highest level since November 10, according to FactSet.

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Analysts said Federal Reserve Chairman Jerome Powell testified at Tuesday’s Senate confirmation hearing contributed to the firm tone. Powell, who is expected to win confirmation from the full Senate for a second term as Fed chief, described the impact of the O’Micron version of the coronavirus on the US economy as short-lived, while debating the central bank’s plans to tighten monetary policy. The economy will not be derailed in an effort to rein in inflation.

“Oil market participants draw their own conclusions” [Powell’s testimony] and bought oil futures contracts in anticipation of continued strong oil demand,” Commerzbank analyst Carsten Fritsch said in a note.

“In addition, there was an increase in risk appetite, as reflected in the rising stock markets,” he added. “In contrast, fundamental data is currently taking a more back seat,” including data from the American Petroleum Institute late Tuesday showed a small drop in crude inventories but a large jump in gasoline supplies last week.

API reportedly said that domestic crude oil supplies declined by 1.1 million barrels for the week ended January 7, while gasoline reserves saw a weekly increase of 10.9 million barrels and distilled supplies rose by nearly 3 million barrels. .

More closely followed inventory data from the Energy Information Administration will be released Wednesday. According to a survey of analysts conducted by S&P Global Platts, the EIA is expected to show an average of 1.6 million barrels of crude inventories. The survey also calls for a weekly supply increase of 3 million barrels for gasoline and 2 million barrels for distillates.

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