By Adedapo Adesanya
Crude oil edged lower on Thursday as investors took profits after two days of gains spurred by tightening supply amid an expected recovery in demand.
Data showed that the Brent crude lost 96 cents or 0.81 per cent to trade at $83.86 per barrel, while the United States West Texas Intermediate (WTI) crude fell by $1.40 or 1.16 per cent to sell at $81.48 per barrel.
Prices soared more than 50 per cent in 2021 and some analysts expect the rally to continue, forecasting that low production capacity and limited investment could lift crude up to $100 per barrel.
But before then, traders saw an avenue to quickly pull their profits at the session on Thursday.
Fears of aggressive interest rate hikes by the US Federal Reserve also pressured the market.
With inflation in the world’s strongest economy running at its highest in nearly 40 years, the country’s central bank is planning to start tapping the brakes on economic growth as soon as March, with further monetary policy tightening likely as the year goes on.
Last month, policymakers agreed to end their bond purchases by March and signalled that they could raise interest rates three times this year.
Analysts noted that this move could potentially tell on crude prices as it would strengthen the US Dollar, which the commodity is priced.
Oil prices typically move inversely to the greenback, with a stronger greenback making commodities more expensive for those holding other currencies.
Investors were taking a deeper look at data from the US Energy Information Administration (EIA) on Wednesday even though crude oil inventories fell more than expected, the report also showed fuel demand has taken a hit from Omicron in the country, which is the world’s largest oil consumer.
However, losses were limited by speculation that Omicron was not severe enough to derail a global demand recovery and cold weather in North America.
Global oil demand has proven to be more resilient to the effects of the Omicron variant’s spread than the International Energy Agency expected, according to its chief, Mr Fatih Birol.
The head of the IEA also noted the supply disruptions in Libya and Kazakhstan also contributed to the imbalance with demand.
“We see some of the key producers including Nigeria, Libya and also Ecuador that have serious supply disruptions,” Mr Birol said.
In Nigeria, production continues to be affected by technical and operational problems while most other OPEC members and Russia have also found it hard to boost production in line with quotas.
Freezing winter temperatures disrupted crude flows in some parts of the United States but the pipelines that stopped operations have since resumed.
Dipo Olowookere