The demand surge and the economic outlook are positive, but oil bulls still need to guard against two major risks

On Thursday (December 16) in the European market, U.
S.
crude oil futures continued to rise, close to $72 / barrel, although the spread of the Omicron variant may curb global consumption, but the Fed's adjustment to monetary policy boosted the market's optimism about economic recovery, while record demand and crude oil inventories in the United States supported oil prices
.

U.
S.
crude inventories fell more than expected, with indicators pointing to a surge in U.
S.
demand

U.
S.
crude inventories fell more than expected last week, and fuel inventories unexpectedly fell as potential consumer demand rose to record
highs, the U.
S.
Energy Information Administration said on Wednesday.
EIA data showed crude inventories fell by 4.
6 million barrels, beating analysts' expectations
.
After last year's plunge, oil demand began to recover
in 2021.

The EIA also said supply of refinery products, a measure of demand, rose to 23.
2 million b/d in the latest week on higher supplies of gasoline, diesel and other refined products
.
The less volatile four-week average demand is now at 21.
3 million b/d, above pre-pandemic levels
.

U.
S.
gasoline inventories fell by 719,000 barrels this week to 218.
6 million barrels, compared with an expected increase of 1.
6 million barrels
.
Distillate inventories, including diesel and heating oil, fell by 2.
9 million barrels versus an expected increase of 688,000 barrels
, EIA data showed.
Refinery output fell by 115,000 barrels
per day last week, the EIA said.
The refinery's capacity utilization rate was unchanged at 89.
8%.

Giovanni Staunovo, commodities analyst at UBS, said: "The EIA data is very strong on all fronts, with record potential oil demand and a large
decline in crude and refined product inventories.
"

While the United States has made good on its statement to release its National Strategic Reserve Stocks, which have fallen to their lowest level since late 2002, overall commercial crude oil inventories are still declining
.

The Fed's optimism boosted risk appetite

The Fed meeting announced that interest rates were left unchanged
.
Federal Reserve Chairman Jerome Powell later announced at a press conference that he would reduce bond purchases by $30 billion a month from January next year, doubling the level of bond purchases in November and December, saying that it may continue to adjust the pace according to the
economic outlook.
The dot plot released after the meeting showed that most officials expect three rate hikes next year and two in 2024
.
The Fed's doom to combat inflation has actually boosted market confidence, and other risk assets such as crude oil and equities have been boosted
.

Macro strategist Cameron Crise noted that at this meeting, the Fed took unusual steps to accelerate the pace of tapering asset purchases, while most attention was focused on expectations on the dot plot before, during and after the announcement
.

Overall, the Fed seems to expect three rate hikes to start to lose momentum to inflation, as the median core PCE forecast for 2023 rises only slightly and remains unchanged in 2024
.
Increasing austerity now, or at least next year, means less
necessity later.
Therefore, the forecast for 2024 has been reduced from 3 to 2 rate hikes

The oil market still needs to be wary of two major risks in the future

However, Tamas Varga of oil broker PVM said: "Although the Fed's announcement triggered a surge in oil prices and share prices, the withdrawal of economic support measures and the Omicron crisis are the two major headwinds
facing the oil market right now.
" "

In the European market on December 16, U.
S.
crude oil futures continued to rise, approaching $72 per barrel Virus concerns limited oil price gains
.
The UK and South Africa are reporting record daily cases of COVID, while many companies across the globe are asking employees to work from home, which could limit future demand
.