Strong Overnight Gains Extend the Crude Oil Futures

Crude Oil futures rose in Asia’s mid-morning trade on Jan. 12, extending an overnight upswing, as investors remained bullish on the outlook for oil following comments from US Federal Reserve head Jerome Powell. Oil prices were still riding a wave of risk-on mood from the US session after Fed Chairman Jerome Powell stated during a congressional hearing on Jan.

11 that the Fed will raise interest rates as required to combat inflation while repeating that the economy was on track. Key US equity indices closed higher as a result of the comments, while both Crude Oil benchmarks extended gains from earlier in the Asian session to close about 4% higher.While Fed Chair Jerome Powell reiterated that policy normalisation would come sooner rather than later to limit inflation, he also stated that the reduction in monetary support was necessary to keep the economy on track for additional labour market growth.

Overall, Powell’s remarks appear to imply that the Fed is in charge of the economy rather than being held hostage by rising inflationary pressures.Both Crude Oil benchmarks are now near two-month highs, with the front-month ICE Brent contract last settling higher on Nov. 9 and the front-month WTI contract last settling higher on Nov. 9. The surge in the oil market yesterday had little in the way of a fundamental catalyst.

Despite a number of supply disruptions and mounting concerns over OPEC spare capacity, sentiment has been essentially positive since the beginning of the year. According to the latest S&P Global Platts poll, the gap between OPEC+ Crude Oil quotas and production remained wide, as the group’s slow easing of its planned cutbacks once again outpaced real output growth in December.