Oil prices rose on Wednesday in international markets above $84 as fears of aggressive interest rate hikes in the U.S. eased, and weekly reports showed a decline in inventories, signaling stronger demand.
In the London market, the price of a barrel was 80 cents higher than yesterday’s closing, amounting to $84.49. In the U.S. market, a barrel traded at a price 93 cents higher, at $78.07.
Markets today focused on the speech of U.S. Federal Reserve Chairman Jerome Powell, whose messages, traders concluded, highlighted strict monetary policy less than expected.
– It seems that traders were somewhat defensive as they expected a sharper tone (in monetary policy), but Powell held back – said Craig Erlam from OANDA.
The market hopes that a less aggressive increase in interest rates could spare the U.S. economy from a sharp slowdown or even a decline in activity, which would impact oil demand.
China, on the other hand, is on the brink of a strong recovery in consumption following the lifting of strict COVID-19 containment measures.
Force Majeure
Global supply will only grow modestly, while demand is expected to surge, meaning that these two key market factors will converge in the coming months, explains Stephen Brennock from PVM.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies confirmed last week that they would reduce production by two million barrels per day by the end of the year, and an Iranian official stated on Wednesday that this measure would likely be extended at the next meeting.
A strong earthquake in Turkey and Syria halted the export of Iraqi and Azerbaijani oil from the Turkish port of Ceyhan on Monday. The Azerbaijani branch of BP declared « force majeure » for deliveries from Ceyhan while the Iraqi pipeline to that Turkish port reopened on Tuesday.
Support for prices was also provided by a decline in U.S. crude oil inventories last week, by 2.2 million barrels, according to data from the API (American Petroleum Institute), as reported by market sources.
Separately, OPEC announced today that on Tuesday, the price of a barrel of oil from its member countries rose by $2.30, to $80.50.
