Oil prices have been on the front foot over the course of the last two sessions and, on Thursday, WTI challenged weekly highs at $73.00 before pulling back a little to the low-$72.00s. Oil prices are up just under $1.0 on the day, taking the two-day run of gains to over $2.0 per barrel (roughly 3.0%), with traders seemingly having aggressively bought into the mid-week dip below $70.00 per barrel.
Market commentators said that Fed Chair Jerome Powell’s bullish view of the US economy heading into 2022 (which seemed to help equities) has helped support energy market sentiment on Wednesday and Thursday. Traders were also citing Wednesday’s official US inventory report as bullish, in that it implied that crude oil consumption in the US had risen to 23.2M barrels per day, significantly above the 2020 average of just over 18M barrels per day. Analysts at oil broker PVM said that “these figures suggest a healthy economic backdrop”.
But oil markets continue to monitor risks to the outlook, including the prospect of rising supply in 2022 from OPEC+ and non-OPEC+ nations alike and the spread of Omicron. The UK and South Africa both reported record daily infections on Thursday and other countries will surely be following suit soon. The big question now is whether these high infection rates will translate into high hospitalisation and death rates, which hasn’t yet been the case in South Africa.
Recent upside hasn’t been enough for oil to mount a serious challenge of the top of recent ranges above $73.00. Some traders suspect that into the year-end, oil markets may remain rangebound in the $70.00-$73.00 area as traders balance Omicron/pandemic risks, fears of oversupply in 2022 against high inflation and economic bullishness, particularly with regards to the US.
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