Oil steadied after its biggest one-day gain this year as investors embraced risk assets and industry estimates showed another draw in U.S. stockpiles.
West Texas Intermediate traded above $81 a barrel after rallying 3.8% on Tuesday. The industry-funded American Petroleum Institute reported that U.S. crude inventories sank by about 1 million barrels last week, according to people familiar with the figures. The snapshot also showed a drop in crude at the key storage hub in Cushing, although gasoline holdings jumped.
Crude’s rally on Tuesday to the highest close since Nov. 11 came alongside gains in raw materials and equities after Federal Reserve Chair Jerome Powell sought to reassure investors the central bank can rein in inflation without damaging the U.S. economy. If he succeeds, that would safeguard oil demand.
Oil has roared higher in the opening days of the new year as concerns about the pandemic, especially the impact of the omicron variant, have eased off. At the same time, stockpiles have extended declines, suggesting a tighter market, and several OPEC+ producers have seen interruptions to supply.
“There are a lot of supply factors and omicron fears are ebbing,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore. “The market will remain tight for a while. Wherever the market is right now has just started to reflect oil’s fair value and there is still more to run.”
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