By Adedapo Adesanya
Oil climbed more than 3 per cent on Tuesday after the head of the US central bank eased market concerns over interest rate hikes.
Brent crude futures were up $2.52 or 3.1 per cent to $83.51 a barrel, as the US West Texas Intermediate rose by $2.77 or 3.7 per cent to $76.88 per barrel.
The Federal Reserve Chairman, Mr Jerome Powell, said Tuesday very strong jobs data released last week simply affirms that the central bank has some way to go on raising rates.
Speaking about Friday’s release of the January jobs data, he said that the body “didn’t expect it to be this strong.”
Mr Powell said the data “shows you why this will be a process that takes a significant period of time” when it comes to tightening monetary policy.
He, however, declined to say whether knowing about the strength of the data would have affected last week’s 25 basis point rate rise.
Prices also gained support as the US Dollar index fell after the data, raising oil prices. Interest rate hikes typically strengthen the dollar, which could make crude more expensive for holders of other currencies.
On the supply side, oil export disruptions have created a stir in the market following major earthquakes in Turkey and Syria that resulted in the deaths of more than 5,000.
The 1 million barrel per day Ceyhan oil terminal in southern Turkey stopped operations on Monday, according to Tribeca Shipping Agency, who added that, as a whole, the ports in southern Turkey had been affected by the earthquake. Oil loadings were expected to resume today, but inclement weather caused a disruption in berthing.
Also, Norway’s shutdown of its Phase 1 535,000 barrels per day Johan Sverdrup oilfield due to a technical fault in a cooling system supported prices.
China’s reopening progress is also pressuring prices upward as the market eyes a demand boost from its zero-Covid transition.
The International Energy Agency (IEA) expects half of this year’s global oil demand growth to come from China, Mr Fatih Birol, the agency’s chief, said on Sunday, adding that jet fuel demand was surging.
The US Energy Information Administration (EIA) will release US crude oil and product inventory figures later on Wednesday, just as all eyes will be on the Federal Reserve Chair Mr Powell’s speech on Wednesday.
The EIA also said that US crude production would rise in 2023 even as demand flattens, according to its Short-Term Energy Outlook. EIA’s latest forecast calls for crude oil production to rise by 590,000 barrels per day to 12.49 million barrels per day in 2023 and by another 160,000 barrels to 12.65 million barrels per day next year.
