Crude oil futures rise on risk-on sentiment after upbeat FOMC meeting

Crude oil futures were higher in mid-morning trade in Asia Dec. 16 as risk-on sentiment returned to oil markets after a bullish overnight session on Wall Street in response to the US Federal Reserve providing an upbeat assessment of the economy.

Data showing a large draw in US crude oil stocks last week also supported prices.

At 10:19 am Singapore time (0219 GMT), the ICE February Brent futures contract was up 58 cents/b (0.79%) from the previous close at $74.46/b, while the NYMEX January light sweet crude contract rose 70 cents/b (0.99%) to $71.57/b.

"Having clarity out of the FOMC meeting yesterday, it appears that the outcome was well received by markets, with the positive momentum potentially continuing into Asia markets today," IG market strategist Yeap Jun Rong said, referring to the US Federal Reserve open market committee meeting that concluded Dec. 15.

The FOMC at the meeting said it would double the scale of the tapering of its monthly asset purchases from January, with the program to end earlier than planned in February. A majority of Fed policymakers now also see three rate hikes in 2022, up from one at its September meeting.

"While there is clearly a more aggressive shift in the Fed's overall tightening process, markets have been pre-empted weeks before of an impending hawkish shift and built-in expectations seemed to have driven the bullish moves for Wall Street overnight," Yeap said, noting that of the 11 sectors in the S&P 500 index, 10 settled in the black.

Oil prices were also drawing support from the US Energy Information Administration's latest inventory report released Dec. 15.

Total US commercial crude stocks fell 4.58 million barrels to 428.29 million barrels in the week ended Dec. 10, the EIA said -- the biggest one-week draw since the week ended Sept. 10. The draw put nationwide crude stocks at an eight-week low and left them 7.5% behind the five-year average for this time of year.

Earlier, the American Petroleum Institute's weekly report Dec. 14 said crude stocks fell 815,000 barrels in the week to Dec. 10, while analysts surveyed by S&P Global Platts on Dec. 13 had pointed to a 1.7 million-barrel decline over the period.

Nationwide US gasoline stocks saw a counter-seasonal draw of 720,000 barrels to 218.59 million barrels, while distillate stocks fell by 2.85 million barrels to 123.76 million barrels.

Despite the US bullish data, analysts cautioned that the coronavirus omicron variant threat globally remained ever-present.

"Omicron worries will keep oil prices heavy as even the virus continues to spread quickly across heavily vaccinated countries. The UK reported 78,610 more COVID cases, the most since the pandemic began," OANDA senior market analyst Edward Moya said.