Oil prices rise to two-month high

Jerome Powell's Omicron comments bolster investor sentiment

Oil rig at sunset                                 
There is anxiety about whether some OPEC+ members will be able to meet new targets - Photo:Shutterstock
                                

Oil prices rose to their highest level in two months on Wednesday, bolstered by waning fears about the Omicron variant of Covid-19 and tightening global supply. 

Although the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) agreed last week to increase production by 400,000 barrels per day (bpd) from February, anxiety has mounted as to whether this increase in supply will keep pace with mounting demand. 

Furthermore, there are concerns that some members of the consortium, such as Libya, Nigeria and Angola, might struggle to meet the new targets. 

On Tuesday, Brent crude oil futures surged by almost 4% after US Federal Reserve chair Jerome Powell outlined his expectation that the economic impact of the Omicron strain will be relatively minimal and “short-lived.” 

EIA

Wednesday saw the US Energy Information Administration increase its global oil demand forecast for 2022 to 3.62 million bpd. In addition to being 70,000 bpd higher than last month’s forecast, this stood 260,000 bpd higher than the level seen in 2019 before the Covid-19 pandemic. 

The organisation increased its forecast for 2022 crude oil futures by $4.90 per barrel from the previous month to $74.95 per barrel for Brent crude and $71.32 per barrel for West Texas Intermediate crude. 

European jet fuel refining margins have returned above pre-Covid levels, according to the latest data. Nonetheless, Euroilstock data has indicated that European refiners’ crude and oil product stocks in December stood 11% lower year-on-year. 

Prices and equities

By 14:30 UTC, spot Brent traded up by 0.6% at $84.00 per barrel, having started the year at $77.60 per barrel. WTI spot stood 0.8% higher at $81.59 per barrel, having begun the year at just above $75 per barrel. 

Energy equities rose in accordance with the price. BP traded up by 2.5% at 378.90 pence, while Royal Dutch Shell stood 2.3% higher at 1,800.20 pence.

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