Oil rises towards $75 as U.S. demand outweighs the FED's virus concern

Like equities, crude and other risk assets also rose after the Federal Reserve announced an optimistic economic outlook, boosting investor morale despite the Fed's long-awaited end to monetary stimulus. [MKTS/GLOB]

Brent crude oil rose 65 cents, or 0.9%, to $74.53, while US West Texas Intermediate (WTI) crude oil rose $1.01, or 1.4%, to $71.88.

Demand is rising in 2021 after last year's crash, and the U.S. Energy Information Administration (EIA) said Wednesday that products supplied by refineries, a proxy for demand, rose to 23.2 million barrels per day (bpd) in the past week. [EIA/I]

"These numbers point to a healthy economic footing," said Tamas Varga of oil broker PVM.

"Although the Fed's statement triggered a jump in both oil and stock prices, the pullback of economic support and the Omicron crisis are the two big headwinds the oil market is currently facing."

Giving further price support, the EIA also reported that US crude inventories fell by 4.6 million barrels, more than analysts' forecast.

As the International Energy Agency pointed out in its monthly report this week, concerns about the virus and the prospect of oversupply next year are limited gains. [IEA/M]

While the UK and South Africa are reporting record daily cases of COVID-19, many firms around the world have asked their employees to work from home, which could limit demand going forward.

"Despite recent reports that the good mood in the oil market will carry over into the first quarter, we are skeptical," said Barbara Lambrecht of Commerzbank (DE:CBKG). "The end result is a significant oversupply."