Oil rose for a third straight day on Wednesday as investors felt more comfortable with risk a day after remarks from the Federal Reserve chairman eased their worries about future interest rate hikes.
Comments from U.S. Federal Reserve Chair Jerome Powell on Tuesday were seen as less hawkish than feared, boosting risk appetite and weighing on the dollar. A weaker U.S. currency makes dollar-denominated oil cheaper for buyers holding other currencies.
“It would appear traders had become a little more defensive on the expectation of a hawkish shift, but Powell refrained from taking the leap,” said Craig Erlam, senior market analyst at brokerage OANDA.
Brent crude rose 82 cents, or 1%, to $84.51 a barrel by 11:07 a.m. EDT (1607 GMT). U.S. West Texas Intermediate (WTI) crude climbed 93 cents, or 1.2%, to $78.08.
Investors hope less aggressive U.S. interest rate increases will help the world’s biggest economy dodge a sharp economic slowdown or recession that would hit oil demand. China’s ending of COVID-19 curbs, meanwhile, is also expected to support demand for fuel.
“A looming oil demand surge together with lacklustre global supply growth will ensure that the oil balance tightens over the coming months,” said Stephen Brennock of oil broker PVM.
On supply, OPEC and its allies, together known as OPEC+, last week decided to keep output curbs in place and an Iranian official on Wednesday said the group is likely to stick with current policy at its next meeting.
The earthquake that struck Turkey and Syria on Monday stopped crude oil flows from Iraq and Azerbaijan out of the Turkish port of Ceyhan. BP Azerbaijan has declared force majeure on Azeri crude shipments from the port. Iraq’s pipeline to Ceyhan resumed flows on Tuesday.
Limiting oil’s price gains was U.S. Energy Information Administration data showing U.S. oil production rose last week to the highest since April 2020.
“There are some people out there definitely throwing money at the production side of the business…that was bearish for the market,” said Bob Yawger, director of Energy Futures at Mizuho.
Crude inventories (USOILC=ECI) rose by 2.4 million barrels in the week ended Feb 3 to 455.1 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.5 million-barrel rise.
Source: Reuters (Reporting by Alex Lawler Additional reporting by Sonali Paul in Melbourne and Jeslyn Lerh in Singapore Editing by Jason Neel, David Goodman and David Gregorio)