Meanwhile, Sen says price spikes due to high demand may occur later this year: File Image/Pixabay
With the U.S. Federal Reserve expressing "dovish" sentiment on Tuesday, oil prices climbed as high as 3.8 percent for West Texas Intermediate, an increase that comes as American inventories seem poised to decline yet again and global tightening is expected to continue.
WTI advanced $2.99 to settle at $81.22 per barrel, while Brent gained $2.85 to settle at $83.72 per barrel.
Federal Reserve Chair Jerome Powell's comments to the Senate Banking Committee on Tuesday were widely interpreted to mean that the Fed would do little to alter current market consensus; this caused the dollar to sink, increasing the appeal of commodities priced in the currency.
Jeffrey Halley, analyst, OANDA
Omicron has yet to wreak the havoc of the Delta variant and may never do so
Adam Crisafulli, founder of Vital Knowledge, said Powell's remarks were "a touch more dovish than what was implied in the recent minutes and suggested by other Fed speakers in the last few days."
Most crucially, Powell in his address reiterated the conviction of scientists that omicron will be short lived and therefore so will its impact on the economy, and he added that ensuing quarters could be very positive for the economy after the surge driven by the variant subsides.
Jeffrey Halley, analyst at OANDA, remarked, "Omicron has yet to wreak the havoc of the Delta variant and may never do so, keeping the global recovery on track."
Meanwhile, a survey of analysts estimates a U.S. crude stockpile decrease of 1.85 million barrels for last week, and this caused Bob Yawger, director of the futures division at Mizuho Securities USA, to say, "Storage has been down for weeks on end and as long as that continues, the market is going to continue to bid; if stockpiles post a big draw, then we will be at the lowest level since 2018."
Amrita Sen, founder and director of research at Energy Aspects, predicted that oil demand would rise by close to 3 million barrels per day (bpd) this year with the biggest driver of growth being most of Asia, and that once omicron has peaked "demand will be very, very strong."
She added that an average of $114 oil is possible in 2023 and that price spikes in the second half of 2022 may occur.
As for recent production outages that have affected crude trading of late, Chevron on Tuesday reported that production at Tengizchevroil, Kazakhstan's largest oil venture, is back to normal after contractors disrupted rail services last week in support of protests taking place across the country.