Sonali Paul

MELBOURNE, (Reuters) – Oil prices rose on Wednesday after the chief of the U.S. Federal Reserve indicated that the central bank might raise rates less slowly than anticipated, which could support the short-term oil demand.

WTI and Brent benchmarks are at their highest trading levels since late November when the Omicron coronavirus variant, which is super contagious, emerged. This variant hasn’t caused fuel demand to rise as much as the previous ones.

U.S. West Texas Intermediate crude futures increased 38 cents or 0.5% to $81.60 per barrel at 0224 GMT. This is in addition to the 3.8% increase seen during the previous session.

After jumping 3.5% the previous session, futures rose 22 cents to $83.94, or 0.3%.

Jerome Powell of Federal Reserve stated Tuesday that the current COVID-19 spike should be able to withstand and has only short-lived impacts. Powell also said it was a long way to get to restrictive monetary policies.

Edward Moya, an OANDA analyst said that although the road is not yet normal it will see support for the economy over the first half. This should be good news for crude oil prices.

The American Petroleum Institute (API), an industry association, showed a less positive picture of fuel demand. There was a lower decline in crude oil stockpiles and larger increases in gasoline and distillate inventories than anticipated.

Market sources, citing API numbers, reported that crude stocks decreased by 1.1million barrels over the week ending Jan. 7. It was significantly lower than the 1.9million barrel draw 10 analysts polled on Reuters forecast.

The increase in gasoline stocks was 10.9 million barrels compared to analysts’ forecasts for an increase of 2.4million barrels. The stockpiles of distillate, which includes diesel and, increased by 3,000,000 barrels, compared to forecasts for an increase of 1.8 million barrels.

The U.S. Energy Information Administration released a revised oil demand outlook on Tuesday. It showed total U.S. crude oil consumption rising by 840,000 barrels/day (bpd), in 2022, in contrast to the previous forecast of 700,000.

EIA also reduced its 2022 production outlook, expecting U.S. oil output growth of 640,000 bpd. This is down from the earlier 670,000 bpd forecast.