The EIA data released Wednesday showed “blockbuster demand for products…and a big drawdown on crude supply, suggesting that the omicron fears that have permeated the marketplace since Thanksgiving Day have been way overstated,” said Phil Flynn, senior market analyst at The Price Futures Group, in a daily report. On top of that, oil is rallying on the fact that Wednesday’s Federal Reserve announcement is “now behind us and even though the Fed was hawkish, the reality is that they had signaled that they would be and despite what you read, the hawkishness was not as bad as expected,” said Flynn.

The U.S. central bank said it will phase out its bond-buying stimulus program by March, much faster than previously planned, and signaled it would raise interest rates more aggressively to combat high U.S. inflation. Oil prices, as well as U.S. equities, rose in the aftermath of the announcement. The mood of the market has “shifted because of clarity” from Fed, Flynn told MarketWatch on Thursday afternoon. “Now we know where the Fed stands and that rates aren’t going to rise tomorrow.”

Oil traders also seem “less concerned” about potential omicron-related restrictions in Europe, he said. And tensions between Russia and Ukraine are also supportive for oil, as that raises the potential for sanctions on Russia that could disrupt its energy sector, he added. Ukraine has called on the European Union to prepare sanctions against Russia to use if Moscow steps up its military aggression, CNB reported Thursday.

West Texas Intermediate crude for January delivery rose $1.51, or 2.1%, to settle at $72.38 a barrel on the New York Mercantile Exchange, the highest finish for a front-month contract since Nov. 24, according to Dow Jones Market Data. February Brent crude, the global benchmark, added $1.14, or 1.5%, at $75.02 a barrel on ICE Futures Europe. “The fact that the financial market environment is generally somewhat less risk-averse lent buoyancy on the one hand: with its accelerated exit from its ultra-expansionary monetary policy, the Fed is apparently giving the impression that everything is under control,” wrote analysts at Commerzbank, in a note.

Meanwhile, the EIA on Wednesday said U.S. crude inventories posted a decline of 4.6 million barrels for the week ended Dec. 10 — the biggest weekly fall since September. “Besides high U.S. exports, this was chiefly due to robust U.S. demand: U.S. gasoline demand increased to 9.5 million barrels per day, thereby exceeding its pre-pandemic level from December 2019. And daily demand for distillates even surged by more than 1.3 million barrels week-on-week to 4.9 million barrels,” the Commerzbank analysts noted.

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