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Federal Reserve Chairman Jerome Powell said on Tuesday the
economy of the United States, the world's biggest oil consumer,
should weather the current COVID-19 surge with only
"short-lived" impacts and was ready for the start of tighter
monetary policy.
Brent crude futures were up 42 cents, or 0.5%, at $84.14 a
barrel at 1211 GMT.
U.S. West Texas Intermediate (WTI) crude futures were up 60
cents, or 0.7%, to $81.82 a barrel. Both contracts are set for
their sixth session of gains out of eight.
Equities, which often move in tandem with oil prices, also
ticked up, while a weaker dollar, making dollar-denominated oil
contracts cheaper for holders of other currencies, also lent
support. [MKTS/GLOB]
The Brent contract is showing growing backwardation with
front-month delivery around $4.20 more expensive than delivery
in six months' time, indicating tight supply currently.
OPEC+ oil producers continue to hold back more than 3 million
barrels per day in output, while sanctions on Iran pin back its
exports.
And though OPEC+ producers are raising their output targets each
month, technical difficulties have prevented several countries
from hitting their quotas.
"Assuming China doesn’t suffer a sharp slowdown, that Omicron
actually becomes omi-gone, and with OPEC+’s ability to raise
production clearly limited, I see no reason why Brent crude
cannot move towards $100.00 in Q1, possibly sooner," said Oanda
analyst Jeffrey Halley.
"There are plenty of variable outcomes in the previous sentence,
the biggest threat being Omicron in China, India, and
Indonesia."
Meanwhile, European jet fuel refining margins are back to
pre-pandemic levels as supplies in the region tighten and global
aviation activity recovers.
U.S. crude stocks fell by 1.1 million barrels for the week ended
Jan. 7, according to market sources citing figures from the
American Petroleum Institute (API) industry group.
Government figures are due on Wednesday. [EIA/S]
On Tuesday, the U.S. Energy Information Administration upgraded
its oil demand outlook, seeing U.S. demand rising by 840,000 bpd
in 2022, up from a previous forecast for an increase of 700,000
bpd.
(Additional reporting by Sonali Paul in Melbourne and Koustav
Samanta in Singapore)
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