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Brent crude is up 1.55% today, rising for the third day in a row following Federal Reserve Chairman Jerome Powell’s unexpectedly less hawkish statement on Tuesday, which appears to have given risk appetites a bit of a boost.
While Brent was trading at $84.99 per barrel on Wednesday at 2:30 p.m. EST, with WTI up 1.58% at $78.36, sentiment is that with a weakening U.S. dollar, dollar-dominated oil will be cheaper for buyers with other currencies.
On Tuesday, Powell said he saw indications that inflation is cooling. That statement came just days after the Fed raised its benchmark interest rate a quarter percentage point to 4.5%-4.75%.
Powell, however, also noted that if the U.S. job market continued to strengthen or if inflation readings accelerated, the Fed may have to raise its benchmark interest rate higher than projected. Last week, new data showed 517,000 jobs were added in January–a doubling over December, with employment falling to 3.4%, the lowest level in over half a century.
Also boosting oil prices is the growing consensus that China’s rebound will be solid, while Russian supply losses add to further bullishness. China’s oil consumption is expected to account for half of this year’s global oil demand growth of 1.9 million barrels per day, according to the International Energy Agency (IEA). Particularly, the IEA sees significantly improved demand for jet fuel and diesel, presenting upticks in travel and industrial activity.
The National Bank of Kuwait said in a Wednesday report that it expects oil prices to average $91 per barrel this year, despite having traded sideways so far.
The IEA expects global oil demand to hit 101.7 million barrels per day this year, which includes a drop of 0.8 million bpd for Q1 2032 (quarter on quarter) in oil demand.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com