Brent crude oil traded at $85 per barrel on Thursday, nearing two-month highs. This was buoyed in part by the expectation that a strong economic recovery would boost demand. However, rising U.S. inventories, as well as high inflation, have capped gains.
Brent crude futures rose 0.3% to $84.93 per barrel by 14:45 GMT, or 26 cents.
U.S. West Texas Intermediate crude futures rose 8 cents or 0.1 to $82.72 per barrel.
Oil prices rose more than 50% in 2021. Analysts expect this trend to continue in 2022. They forecast that an increase in production capacity and investment will cause crude oil to rise to $90 per barrel or even higher.
Commerzbank stated that the main factors driving up prices are “…the generally positive market sentiment, Omicron concerns abate and the expectation for continued dynamic economic growth.”
Prices were also supported by cold weather in North America.
Tamas Varga, PVM Oil analyst, said that it would be interesting to see how optimism holds up when the temperatures rise in spring.
However, rising U.S. fuel inventories and high inflation in the largest economy on earth have weighed.
On Wednesday, data from the U.S. Energy Information Administration showed that fuel demand took a hit from Omicron. In fact, gasoline stocks rose by 8 million barrels in the week to January 7, compared to analyst expectations of a 2.4-million-barrel increase.
Citi stated in a note that “in reality, the weekly EIA reports were less bullish than their headline numbers, as total crude oil inventories fell by 4.8 million barrels, but we’re more than compensated by a stock increase across refined products.”
According to the bank, the drop in crude inventories could be due to tax issues at the end of the year on oil stocks onshore in Texas or Louisiana.
According to research data, U.S. supply is expected to increase as American producers make it easier to produce more oil by increasing well completions in the nation’s top shale field, the Permian basin of West Texas and New Mexico.
Markets are also being affected by concerns about inflation, which could put pressure on the Federal Reserve’s ability to accelerate the timeframe for interest rate increases.
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