Oil rose for a third straight day on Wednesday as investor concern over U.S. interest rates eased somewhat and an industry report pointed to a drop in U.S. crude inventories.
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 80 cents, or 1%, to $84.49 a barrel by 1433 GMT. U.S. West Texas Intermediate (WTI) crude climbed 93 cents, or 1.2%, to $78.07.
With less aggressive U.S. rate increases, the market is hoping the world’s biggest economy can dodge a sharp economic slowdown or even a 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.
Adding further support was weekly inventory data from the American Petroleum Institute, which showed that crude stocks fell by about 2.2 million barrels in the week ended Feb. 3, market sources said.
The market will be looking to see if the decline is confirmed by figures from the U.S. Energy Information Administration at 1530 GMT.
(Reporting by Alex Lawler; Additional reporting by Sonali Paul in Melbourne and Jeslyn Lerh in Singapore; Editing by Jason Neely and David Goodman)
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