Crude oil price advanced this Wednesday to a two-month high despite a big rise in U.S. gasoline inventories.

The rise comes after U.S. Federal Reserve Chair Jerome Powell said that he believes the economic impact of the Omicron variant to be short-lived and sees the U.S. economy as strong enough to comfortably weather rate hikes.

The positive news is that Rystad Energy announced this week that investments in the oil and gas sector should rise 4% to $628 billion in 2022, from $602 billion in 2021, amid ongoing recovery from the pandemic.

There are also expectations that the global crude supply is running ahead of demand, and according to the Organization of the Petroleum Exporting Countries, the crude oil demand should increase in the upcoming quarters to levels seen before the pandemic. Carsten Fritsch, an analyst from Commerzbank added:

Participants on the oil market drew their own conclusions from this and bought up forward oil contracts in anticipation of continued robust oil demand. The rise comes despite the wildfire spread of Omicron, with the Energy Information Administration (EIA) is predicting inventories will rise by 0.5-million barrels per day this year.

The Energy Information Administration (EIA) announced today that oil stockpiles slid 4.6 million barrels to 413.3 million barrels in the week ended January 7.

Supplies were about 8% lower than the five-year average for this time of year, and according to EIA, average oil production should be around 11.8 million barrels per day in 2022 and 12.4 million barrels in 2023, which would exceed the record 12.3 million barrels in 2019.

The World Health Organization also reported that the Omicron variant might cause milder symptoms than the delta variant, but many countries have announced tighter restrictions amid concerns that Omicron could make staffing issues across industries.

It is also important to mention that many countries reported that inflation rose at the highest level in the last several decades and lots of companies reported they had lost sales because of high inflation and supply problems.

The higher oil prices are also adding to inflationary pressures that, along with power outages, could lead to lower industrial activity and a slowdown in the economic recovery.

American Petroleum Institute’s weekly inventory survey showed this Tuesday that U.S. gasoline inventories rose 10.9 million barrels, which could signal weakening demand.

Bulls control the price Data source: tradingview.com

Crude oil prices rose to a two-month this Wednesday, and according to rules of technical analysis, the positive trend remains intact.

Rising above $85 supports the continuation of the bullish trend for crude oil; still, if the price falls below $75, it would be a firm “sell” signal, and the next target could be around $70.

Summary

Crude oil price advanced this Wednesday above $83 after the U.S. Federal Reserve Chair Jerome Powell said that the U.S. economy could withstand the impact of the omicron variant of the coronavirus and rate increases. The Energy Information Administration (EIA) announced today that oil stockpiles slid 4.6 million barrels, and rising above $85 supports the continuation of the bullish trend for crude oil.

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