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Commodities

11 Jan 2022

Oil Prices Soar as Investor Risk Appetite Returns amid Rising Demand

The Index Today

Oil prices faced a surge on Tuesday amid returning investor preference for risk assets amid looming anticipation of upcoming Fed policy on inflation and the resulting interest rate hikes.

Brent crude futures soared by 0.5% to $81.27 per barrel at 0529 GMT, while U.S. West Texas Intermediate (WTI) crude futures inched up by 0.7% with each barrel costing $78.75.

This increase comes amid the recent drops in oil prices owing to the rapid rise in COVID-19 cases around the world. According to Kotak Securities’ Ravindra Rao, the mounting cases of infections pose a significant threat as resulting COVID policies “impact mobility and thereby fuel demand." He further contended that the “virus situation, supply-related issues and trends in equity markets will be key factors affecting crude oil in the near term."

Additionally, the OPEC+’s difficulty in keeping up with the rising global demand for fuel is also instrumental in the current hike in oil prices. Craig Erlam, an analyst at OANDA, contends that "the fundamentals remain bullish for crude again - especially if OPEC continues to struggle to hit its quota as part of the 400,000 barrels per day monthly increases, as demand strengthens."

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