By Peter Nurse
Investing.com -- Oil prices rose Thursday, boosted in line with most other risk assets on the back of the Federal Reserve's confidence in the strength of the U.S. economy as well as the sharpest weekly drop in U.S. crude inventories since September.
By 8:45 AM ET (1345 GMT), U.S. crude futures traded 0.7% higher at $71.39 a barrel, while the Brent contract rose 0.7% to $74.41.
U.S. Gasoline RBOB Futures were up 0.7% at $2.1412 a gallon.
The Fed announced plans, at the conclusion of its two-day policy meeting on Wednesday, to tackle inflation by speeding up the pace at which the central bank ends its asset-buying program, judging the U.S. economic recovery to be sufficiently strong to cope with the tighter policy.
This gave most risky assets a boost, with the S&P 500 closing near its all-time high Wednesday. The oil market was no exception.
Adding to the positive sentiment was Wednesday’s report by the U.S. Energy Information Administration, which indicated that crude stockpiles shrunk by 4.6 million barrels last week, the largest draw in inventories for three months as demand for oil in the world’s largest economy remained strong.
“The EIA data was … extremely bullish,” said Phil Flynn, an energy analyst at The PRICE Futures Group. “A very big draw considering that it would have been larger except for a 2 million barrel release from the SPR back into commercial inventory. That puts crude supply about 7% below the five-year average for this time of year.”
That said, traders are still keeping a wary eye on the spread of the Covid-19 virus, and the Omicron variant in particular, even after these strong U.S. numbers suggest the country’s drivers are not too concerned.
Britain, South Korea and South Africa reported record daily Covid-19 cases on Wednesday, and the International Energy Agency, in its monthly report earlier this week, pointed to the likelihood of a supply surplus next year.
"We are skeptical despite the latest news that the good sentiment on the oil market will be carried over into the first quarter," said Barbara Lambrecht, an analyst at Commerzbank (DE:CBKG), in a note.