WTI crude oil futures rose above $71.5 a barrel on Tuesday as investors may be paying attention to an upbeat oil demand forecast released by OPEC, despite short-term concerns about renewed economic constraints due to Omicron.
On Monday, OPEC said it expects global oil demand to average 99.13 million barrels per day in the first quarter of 2022, up 1.11 million bpd from last month's forecast. The organization also stuck to its timeline for a return to pre-pandemic oil consumption levels, saying the new coronavirus variant will have a mild and short-lived impact. However, the UK and Norway tightened restrictions as the first publicly confirmed death caused by the new strain of the virus was reported in the UK. In mainland China, the first case of omicron has also been reported in the city of Tianjin, while the major manufacturing province of Zhejiang is under its first quarantine this year, with tens of thousands of residents in quarantined and virus-affected areas suspending businesses, restricting flights and canceling events.
Meanwhile, gold remains unchanged near $1785 per ounce as markets may now focus on a number of central bank decisions this week, including a key Federal Reserve meeting. The yellow metal may be supported by still-high consumer prices, where U.S. inflation accelerated in November and had its fastest pace of growth since 1982 at 6.8 percent. However, the reading reinforced expectations that the Federal Reserve will signal a faster tapering of asset purchases and an earlier start to rate hikes. Other central banks expected to review monetary policy this week include the European Central Bank, Bank of England and Bank of Japan. Reduced stimulus and higher interest rates raise the opportunity cost of non-performing bullion, potentially reducing its attractiveness.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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