Oil tops $83, as Omicron impact expected to be short lived

* Crude extends 2021 rally

* Libyan oil output rises, but Es Sider exports suspended

* U.S. crude inventories expected to fall for seventh week

* Coming up: API supply report, 2130 GMT (New throughout, updates prices, market activity and comments; new byline, changes dateline, previous LONDON)

By Arathy Somasekhar

Jan 11 (Reuters) - Oil rose to more than $83 a barrel on Tuesday, supported by tight supply and expectations that rising coronavirus cases and the spread of the Omicron variant will not derail a global demand recovery.

A lack of capacity in some countries has meant that supply additions by the Organization of the Petroleum Exporting Countries (OPEC) are running below the allowed increase under a pact with its allies.

On the demand side, Federal Reserve Chair Jerome Powell on Tuesday said he expects the economic impact of the Omicron variant to be short lived, adding that ensuing quarters could be very positive for the economy after Omicron subsides.

Brent crude gained $2.6, or 3.22%, to $83.46 a barrel by 11:30 a.m. ET (1630 GMT), it highest since early November, after having lost 1% in the previous session.

U.S. West Texas Intermediate (WTI) rose $2.75, or 3.5%, to $80.97, also its highest since mid-November. On Monday, it fell 0.8%.

"Combination of facts that demand is going to be stronger than anticipated and that OPEC's supply may not be grow as fast as the demand is why prices are climbing," said Phil Flynn, senior analyst at Price Futures Group.

Major economies have avoided a return to severe lockdowns, even as coronavirus cases have soared. European jet fuel refining margins, for example, are back to pre-pandemic levels as supplies in the region tighten and global aviation activity recovers despite the spread of the Omicron variant.

"Omicron has yet to wreak the havoc of the Delta variant and may never do so, keeping the global recovery on track," said Jeffrey Halley, analyst at brokerage OANDA.

Brent rose by 50% in 2021 and has rallied further in 2022, with investors expecting increasing demand while OPEC and its allies, collectively known as OPEC+, slowly ease record output cuts made in 2020.

Recent outages in Libya have also supported prices and the National Oil Corp on Tuesday said it was suspending exports from the Es Sider terminal.

A weaker U.S. dollar also helped to support oil because it makes oil cheaper for buyers holding other currencies and tends to reflect higher risk appetite among investors.

Upcoming reports on U.S. inventories are expected to show crude stockpiles fell by about 2 million barrels.

The first of this week's supply reports, from the American Petroleum Institute (API), is due at 2130 GMT. (Additional reporting by Sonali Paul in Melbourne and Koustav Samanta in Singapore Editing by David Evans, David Goodman and David Gregorio)

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