DTN Oil

WASHINGTON (DTN) -- With U.S. dollar index rapidly weakening against foreign currencies, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange powered higher in early trade Tuesday as investors grapple with concerns over surging inflation across major economies compounded by an Omicron-led tsunami of coronavirus infections in the United States and European Union, while China is seeing an increase in cases despite Beijing's zero-tolerance policy and strict lockdown measures.

Inflation in countries that are part of the Organization for Economic Cooperation and Development surged to a 26-year high 5.8% in November, according to OECD figures released Tuesday morning. Excluding food and energy, consumer prices were up 3.8%, contributing significantly to headline inflation in a number of economies. There were, however, large variations among the countries that are part of the economic bloc, with prices rising 6.8% in the United States, but only 0.6% in Japan.

The fresh data came against a backdrop of increasing pressure on central banks to raise interest rates. Raphael Bostic, president of the Federal Reserve Bank of Atlanta, said on Monday that he sees three interest rates hikes in the United States this year, with the potential for the fourth towards the end of 2022 should inflation pressures remain high.

U.S. inflation is expected to accelerate to above 7% in the 12 months ending in December, which would be the highest print in nearly 40 years. Fueled by federal stimulus, supply chain disruptions, and a tight labor market, inflation in the United States still has room to accelerate in coming months before abating in the second half of the year, according to economists. Federal Reserve Chairman Jerome Powell will likely address those concerns during an appearance before the U.S. Senate Banking Committee later Tuesday morning, with Lael Brainard -- President Joe Biden's nomination for Fed Vice Chair -- set to follow on Wednesday.

Earlier this week, oil futures came under some selling pressure from easing concerns over available supplies in African producer Libya, where political turmoil disrupted a portion of oil production. On Monday, Libya's oil production rebounded to 1 million barrels per day (bpd) after maintenance work on a major pipeline carrying crude to Mediterranean export terminals finished ahead of schedule, according to the country's oil minister Mohammad Oun. Additionally, an agreement with the Petroleum Facilities Guard, a paramilitary group meant to safeguard the country's oil infrastructure, allowed the reopening of oilfields in eastern provinces, adding another 100,000 bpd in current production. Libya's oil production is still about 300,000 bpd below the country's recent output rate following the unplanned outages in late December. Meanwhile, Bloomberg News reported that oil exports from Libya's major ports will likely remain subdued this week due to bad weather in the Mediterranean Sea.

Separately, crude production from the Tengizchevroil venture operated by U.S. oil major Chevron in western Kazakhstan is "gradually returning to normal levels," the company said on Sunday after it adjusted output when nationwide protests reached the field. Before the protests, Kazakhstan produced around 1.6 million bpd of crude oil.

Near 7:30 a.m. ET, front-month West Texas Intermediate futures rallied $1.19 to $79.41 per barrel (bbl), and the international benchmark Brent crude for March delivery gained to $81.97 bbl, up $1.09 on the session. NYMEX February RBOB futures advanced more than 3 cents to $2.3100 gallon, while the front-month ULSD contract added 2.31 cents to $2.5102 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges can be reached at liubov.georges@dtn.com