Crude takes heart from less hawkish Fed and stockpile data

London — Oil rose for a third straight session on Wednesday as concerns about US interest rate hikes eased and an industry report pointed to a drop in US crude inventories.

Comments from Federal Reserve Chair Jerome Powell on Tuesday were seen as less hawkish than feared, boosting sentiment and weighing on the dollar. A weaker dollar makes oil cheaper for holders of 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 and West Texas Intermediate were both 1.2% higher at $84.68 and $78.07 a barrel by 9.12am GMT. 

With less aggressive US rate hikes, the market is hoping the world’s biggest economy can dodge a sharp economic slowdown or even a recession that would hit oil demand, while China’s reopening after ending Covid-19 curbs also bolsters fuel use.

“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, known as Opec+, decided last week to keep output curbs in place, and an Iranian official said on Wednesday the group was likely to maintain the policy at its next meeting.

Also, the earthquake that struck Turkey and Syria on Monday stopped crude flows from Iraq and Azerbaijan out of Ceyhan, though Iraq’s pipeline to the Ceyhan export hub resumed flows on Tuesday.

Adding further support was weekly inventory data from the American Petroleum Institute, which shows crude stocks fell by about 2.2-million barrels in the week ended February 3, according to market sources.

The market will be looking to see if figures from the US Energy Information Administration at 3.30pm GMT confirm the decline. 

Reuters