WTI surges to fresh highs on improved risk appetite

WTI is registering solid gains of 0.43% on Wednesday. Less hawkish comments by Fed Chair Jerome Powell seem to reinforce oil prices.

The US crude oil benchmark, edges up by a margin of 0.50% as a risk-on impulse hits the market, which, worried about an astonishing US jobs report, expected a hawkish signal of Jerome Powell, on Tuesday. Nevertheless, Powell’s muted response gave the green light to traders seeking risk. At the time of writing, WTI is trading at $78.43 per barrel.

WTI has recovered from diving toward the weekly lows of $72.30 on Monday. Expectations after last Friday’s Nonfarm Payrolls report for January added that the US economy added more than 500K jobs, pressured investors as they scrambled to square off their positions in riskier assets ahead of yesterday’s speech by Jerome Powell.

Powell said interest rates would need to increase if solid labor market data threatened to derail the Fed’s progress to curb inflation. However, he declined to give any forward guidance regarding future rate hikes and their size.

Investors’ worries faded as higher interest rates in the United States (US) suggested the greenback could strengthen, which means oil prices are high for buyers holding other currencies.

The reopening of China after relaxing Covid-19 restrictions is expected to support the demand for fuel. In the meantime, the Organization of Petroleum Export Countries and its allies (OPEC+) decided to keep crude output unchanged, as an Iranian official said the cartel is likely to stick to its current policy on Wednesday.

A solid inventory report from the US capped oil prices, as an increment in supply makes oil cheaper. The US Energy Information Administration (EIA) revealed that oil production in the US rose to its highest level since April 2020.