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Oil rises 2% on U.S. crude drawdown, weaker dollar

CommoditiesJan 12, 2022 04:27PM ET
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© Reuters. FILE PHOTO: The sun sets behind an oil pump outside Saint-Fiacre, near Paris, France September 17, 2019. REUTERS/Christian Hartmann/File Photo

By Jessica Resnick-Ault

NEW YORK (Reuters) -Oil prices hit two-month highs on Wednesday on tight supply as crude inventories in the United States, the world's top consumer, fell to their lowest since 2018, and as the dollar weakened and worries eased about the Omicron coronavirus variant.

U.S. crude inventories fell 4.6 million barrels last week to 413.3 million barrels, their lowest since October 2018, the Energy Information Administration said. Analysts had forecast in a Reuters poll a 1.9 million-barrel drop.

"The crude draw was bigger than expected despite a material drop in refining activity," said Matt Smith, lead oil analyst for the Americas at Kpler, a data firm.

Brent crude futures settled up 95 cents, or 1.1%, at $84.67 a barrel. U.S. West Texas Intermediate (WTI) crude futures were up $1.42, or 1.8%, at $82.64.

The falling dollar was the main driver of higher oil prices, overtaking even the EIA draw, Kpler's Smith said. A weaker greenback makes dollar-denominated oil contracts cheaper for holders of other currencies.

The dollar fell to a fresh two-month low against a basket of currencies after data showed U.S. consumer prices rose solidly in December. [USD/]

The Brent contract was in backwardation, with front-month delivery around $4.41 more expensive than delivery in six months, indicating tight near-term supply.

U.S. crude inventories have dropped for seven consecutive weeks, and overall inventories have been tightening across the globe as major producers struggle to increase supply even as demand rises despite rising cases of Omicron.

OPEC+ producers, the Organization of the Petroleum Exporting Countries and its allies, are still holding back more than 3 million barrels per day (bpd) in output while Iranian exports are pinned back by U.S. sanctions.

Though OPEC+ is raising output targets each month, technical difficulties have prevented several countries from hitting their quotas.

U.S. Federal Reserve Chairman Jerome Powell said the U.S. economy should weather the current COVID-19 surge with only "short-lived" impact and is ready for the start of tighter monetary policy.

"Assuming China doesn’t suffer a sharp slowdown, that Omicron actually becomes Omi-gone, and with OPEC+’s ability to raise production clearly limited, I see no reason why Brent crude cannot move towards $100 in Q1, possibly sooner," said Oanda analyst Jeffrey Halley.

"There are plenty of variable outcomes in the previous sentence, the biggest threat being Omicron in China, India and Indonesia."

Oil rises 2% on U.S. crude drawdown, weaker dollar
 

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Comments (10)
Strat Afro
Strat Afro Jan 12, 2022 1:47PM ET
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Easy access to 🇺🇸 assets by the money 💰 launderers. How do billionaires become billionaires?!
Bhagwan Dass
Bhagwan Dass Jan 12, 2022 9:04AM ET
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third class president of us for middle class
Salvador Hernández Sánchez
Salvador Hernández Sánchez Jan 12, 2022 6:42AM ET
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Mexixan presisent with covid, nobody use oil at the moment…. Will be cheap
Itzhak ovadia
Itzhak ovadia Jan 12, 2022 5:56AM ET
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interesting
Todd Gray
Todd Gray Jan 12, 2022 1:13AM ET
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Arabia is working very hard recruiting other economic avenues. perhaps they see they won't be able to solely rely on oil for government revenue.
TJ Theodore
TJ Theodore Jan 12, 2022 1:08AM ET
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Wow. The spinsters have really gone to work now. Im not sure thats what FED chair Powell said today
Joel Schwartz
Joel Schwartz Jan 11, 2022 11:01PM ET
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Remote jobs are the future when inflation makes offices too expensive to rent. Future demand for gasoline will never recover to previous levels.
Strat Afro
Strat Afro Jan 11, 2022 11:01PM ET
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Except for small roads and traffic jams.
perplexed76 .
perplexed76 . Jan 11, 2022 10:52PM ET
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oil is like bitcoin bunch of greedy parasites inside.
Adam Paine
Adam Paine Jan 11, 2022 10:43PM ET
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hope is never a good strategy
Don Getty
Don Getty Jan 11, 2022 10:03PM ET
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economic growth outlook - Powel B*J* more like it
Omar Akre
Omar Akre Jan 11, 2022 10:03PM ET
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