Crude Oil Retreats From Session Highs As US Shares Drop

WTI crude oil has pulled back from session highs above $80.00 as US equities came under selling pressure at the opening of the North American session.

Crude oil is expected to continue to perform better than equities, which are suffering from the Fed’s hawkish policy, if the demand outlook remains strong.

Amid US shares coming under some selling pressure at the Tuesday equity open, front-month WTI futures have pulled back from earlier session highs to the north territory of gains at the $80 per barrel level and are now trading back in the $79.00 area.

WTI prices are still up more than 50 cents on the day and the oil bulls will still be eyeing a test of last week’s highs in the $80.50 area. Oil strategists continue to look upon the Omicron as not likely to impact global oil demand.

Despite the recent hawkish shift in market expectations for Fed tightening that has weighed on US and global shares, with three to four hikes now anticipated in 2022 coupled with quantitative tightening, the outlook for global growth in 2022 remains strong.

In the coming weeks and months, Fed will be maneuvering to guide the tightening policy without slowing the economy unnecessarily, oil may remain a relatively safe risk asset even if Fed tightening expectations continue to weigh on equities.

Private US oil inventory data is scheduled for release Tuesday ahead of Wednesday official EIA US inventory report which is expected to show a seventh consecutive week of draws, with a further 2,000,000-barrel drop in stocks expected.