Crude Oil Futures Extend Strong Overnight Gains

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Crude oil futures continued rising in mid-morning trade in Asia Jan. 12, extending an uptrend from the overnight session, as investors remained bullish on the outlook for oil amid supportive remarks from US Federal Reserve chair Jerome Powell, says an article published in Platts.

Economic recovery

At 10:04 am Singapore time (0204 GMT), the ICE March Brent futures contract was up 20 cents/b (0.48%) from the previous close at $83.92/b, while the NYMEX February light sweet crude contract was 39 cents/b (0.48%) higher at $81.61/b.

Oil prices were still riding on a wave of risk-on sentiment from the US session after Powell at a Jan. 11 congressional hearing said the Fed would raise interest rates as needed to curb inflation, while reiterating that the economic recovery remained on track.

The remarks sent key US equity indices closing higher, while both crude oil benchmarks added on to gains from earlier in the Asian session to settle higher by close to 4%.

“While Fed Chair Jerome Powell maintained the view of policy normalization coming sooner rather than later to curb inflation, he had put across that the pullback in monetary support was to ensure the economic recovery remains on track for further gains in the labor market,” IG market strategist Yeap Jun Rong said.

“Overall, Powell’s comments seem to imply that the Fed is in control of the economic situation, rather than being hand-tied by the elevated inflationary pressures,” Yeap added.

OPEC+ crude oil quotas

Both crude oil benchmarks are now hovering at two-month highs, with the front-month ICE Brent contract last settling higher Nov. 9 and the front-month NYMEX crude contract Nov. 11.

“There was little in the way of a fundamental catalyst for the move in the oil market yesterday. Although clearly, sentiment has been broadly constructive since the start of the year due to a number of supply disruptions and growing concerns over OPEC spare capacity,” ING analysts Warren Patterson and Wenyu Yao said in a Jan. 12 note.

The gap between OPEC+ crude oil quotas and production remains in stark disparity as the group’s steady loosening of its pandemic cuts once again outpaced actual output gains in December, the latest S&P Global Platts survey found.

Total OPEC+ quota compliance in December climbed to 116.5%, the survey found, the highest since the alliance instituted record output cuts in spring 2020, with the 19 members subject to production targets pumping some 620,000 b/d below their combined caps.

In the US, oil stocks continued to tighten. The American Petroleum Institute reported a 1.08 million-barrel draw in US crude oil inventories, though gasoline and distillate stocks saw large builds, media reports indicated.

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Source: Platts

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