Oil rose nearly 4% on Tuesday, supported by tight supplies and expectations that rising coronavirus cases and the spread of the Omicron variant will not improve global demand.
Brent crude rose $2.85, or 3.5%, to $83.72 a barrel, its highest settlement since early November. Global benchmarks fell 1% on Monday.
US West Texas Intermediate (WTI) closed up $2.99, or 3.8%, at $81.22, its highest price since mid-November. It had fallen 0.8 per cent on Monday.
US Federal Reserve Chairman Jerome Powell said he expects O’Micron’s economic impact to be short-lived, adding that the coming quarters could be very positive for the economy, driven by the variant lowering.
“Omicron has yet to wreak the delta version’s havoc and may never do so while keeping a global correction on track,” said Jeffrey Haley, analyst at brokerage OANDA.
Brent grew by 50% in 2021 and further in 2022 as demand reaches pre-pandemic levels, while the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, gradually Records made in 2020 reduce output cuts.
However, capacity constraints in some OPEC countries have kept supply additions below the 400,000-barrels-per-day (bpd) increase agreed last year by the group. [OPEC/O]
Recent cuts in Libya have also buoyed prices, and National Oil Corp said it was suspending exports from the Es Cider terminal.
“The combination of facts — that demand is going to be stronger than anticipated and that OPEC’s supply may not grow as fast as demand — is why prices are climbing,” said Phil Flynn, senior analyst at Price Futures Group.
US crude inventories declined by about 1.1 million barrels last week, less than the 2-million-barrel draw projected in a Reuters poll, according to market sources citing the American Petroleum Institute. Official government figures are due on Wednesday. [API/S][EIA/S]
Eurooilstock data shows shares of European refiners’ crude and oil products fell more than 11% in December from a year earlier. At the same time, European jet fuel refining margins have returned to pre-pandemic levels as global aviation activity recovers despite the spread of Omicron.
Meanwhile, the US government lowered its oil production growth forecast, while raising its oil demand forecast.
Production was projected to increase by 640,000 bpd this year, down from last month’s projection of 670,000 bpd. Total oil demand was now rising 840,000 bpd for the year, higher than the 700,000-bpd increase expected last month. It is projected to increase by another 330,000 bpd in 2023.
(Additional reporting by Alex Lawler and Noah Browning in London, Sonali Paul in Melbourne and Kaustav Samant in Singapore; Editing by Margarita Choy and Paul Simao)
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