Oil prices raised their gains by about 2% in trading today, Tuesday, with US crude rising near $ 80, as investors regained some of their appetite for risk, in conjunction with the continued struggle by some oil producers to increase production.
This comes at a time when the crude markets are awaiting clues from the US Federal Reserve Chairman on the possibility of raising interest rates.
Oil prices ended their trading yesterday with a decline of about 1%, with concern about the impact of the increasing Corona injuries on the demand for crude.
Oil Prices Today
Brent crude futures prices – for March 2022 delivery – rose by about 1.7%, recording $82.25 a barrel.
The price of West Texas Intermediate crude futures – February delivery – also rose by 2%, recording $79.80 a barrel.
A weak US dollar helped support oil prices on Tuesday, as it made oil cheaper for those holding other currencies.
Monetary Policy In America
A US Senate committee is holding hearings this week for Federal Reserve Chairman Jerome Powell and Vice President nominee Lyle Brainard, which could provide new details about the US central bank’s plans to tighten monetary policy.
The recent drops in oil prices have been driven by concerns about a rise in coronavirus cases around the world, which is likely to reduce fuel demand.
“The rise in coronavirus cases is a cause for concern as restrictions affect mobility, and hence the demand for fuel,” said Ravindra Rao, head of commodity research at Cuttack Securities.
“However, despite the sharp rise in the number of cases, none of the major economies are looking at severe shutdowns,” he added, Reuters reported.
He pointed out that “the virus situation and issues related to supply and trends in the stock markets will be major factors affecting crude oil in the near term.
Some analysts said that the lack of supply from the Organization of the Petroleum Exporting Countries (OPEC) and its external allies led by Russia in the OPEC+ alliance and not keeping pace with demand is also supporting prices.
“The market can still benefit from weak supply and supply risks from Russia… with rising political tension as Moscow builds up its forces on Ukraine’s border,” commodity analysts ANZ Research said in a note.
Analysts pointed out that the OPEC supply additions are less than the increase allowed under the OPEC + agreement, as some countries, including Nigeria, do not produce the agreed quantities.
“The fundamentals are still bullish for crude again – especially if OPEC continues to struggle to get to its quota with a portion of the 400,000 bpd monthly increases, as demand increases,” said Craig Erlam, analyst.
Libya, which is exempt from OPEC supply restrictions, was affected by pipeline maintenance and oil field disruptions, but it announced, on Monday, the resumption of production in the El Feel oil field, after reaching an agreement with the Petroleum Facilities Guard, after a halt of more than 3 weeks.
This comes at a time when the market is awaiting data on US oil and product inventories from the American Petroleum Institute, scheduled to be announced at 9:30 pm GMT , followed by data from the US Energy Information Administration tomorrow, Wednesday.
Six analysts polled by Reuters expected a decline in US oil inventories by about two million barrels in the week ending January 7, which would represent the seventh consecutive week of a decline in crude inventories.