(Bloomberg) -- Oil continued a robust new year rally after U.S. stockpiles contracted and energy agencies said markets were tightening.
West Texas Intermediate rose toward $83 a barrel in early Asian trading after closing at the highest level in more than two months on Wednesday. Since 2022 began, WTI has surged 10%, joining other commodities in a strong start to 2022.
U.S. crude stockpiles sank to the lowest level since 2018 last week, according to data from the Energy Information Administration on Wednesday. Inventories at the key storage hub in Cushing also fell, the government agency said.
Crude has surged this month on signals that global consumption is largely weathering the hit from the omicron virus variant as key economies continue to recover from the pandemic. The International Energy Agency said demand is stronger than expected, while the EIA’s latest outlook showed that global oil inventories are set to decline slightly over the first quarter.
Still, there are some warning signs. Road traffic has thinned across Asia at the start of the year as omicron sweeps through the key crude-importing region. Fewer vehicles have transited through most capital cities so far this month than in December, according to mobility data from Apple Inc (NASDAQ:AAPL).
Oil’s renewed surge -- along with gains in other raw materials -- will fan inflationary pressures as central banks shift gears to battle escalating price pressures. Federal Reserve Governor Lael Brainard said tackling inflation while sustaining an inclusive recovery is the U.S. central bank’s most pressing task.
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