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.
West Texas Intermediate Crude for February Delivery CL00,
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,
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.
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.