Oil rises on hopes of recovery in China’s demand

Crude oil rose on Wednesday as optimism for a recovery in demand in China and a possible unchanged decision to cut output by major oil producers offset worries about a global recession.

Brent crude was up 22 cents, or 0.3%, at $86.35 a barrel by 0501 GMT after falling 2.3% in the previous session. U.S. West Texas Intermediate (WTI) crude oil climbed 13 cents, or 0.2%, to $80.26 a barrel, after falling 1.8% on Tuesday.

“Expectations that China’s fuel demand will recover in the second half of the year are rising and are likely to support market sentiment,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

Analysts at Bank of America Securities said the opening of the Chinese economy could unleash a large wave of pent-up demand over the next 18 months.

On the supply side, volumes will remain steady in the medium term as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, are expected to maintain their production quotas.

An OPEC+ committee is likely to approve the producer group’s current oil output policy when it meets next week, five OPEC+ sources said on Tuesday, as hopes for higher Chinese demand are balanced by concerns about inflation and global economy.

OPEC+ in October decided to cut output by 2 million barrels per day from November to 2023 on a weaker economic outlook.

But gains in oil prices were capped by a bigger-than-expected rise in U.S. oil inventories reported after the market settled on Tuesday.

U.S. crude inventories rose by about 3.4 million barrels in the week ended Jan. 20, according to market sources citing data from the American Petroleum Institute. That was three times the forecast for about 1 million builds in a preliminary Reuters poll on Monday.

Nissan’s Kikukawa, however, expects the build “to be temporary, as supply disruptions from a cold snap in the United States a few weeks ago will only affect data in the next two weeks.”

Official data from the US Energy Information Administration will be released later on Wednesday.

Kikukawa expects WTI to trade in a range between $75 and $85 a barrel in the coming weeks.

Markets are also watching interest rate decisions from central banks for more trading.

“It appears that the absence of hawkish Fed comments from the current doldrums has removed a key surplus to risk sentiment for now, providing some renewed traction back to growth,” Yeap Jun Rong, market analyst at IG, said in a note.

Investors are waiting to see if the Federal Reserve “will react to the recent surprise in falling inflation and growth” when it meets next week, the analyst added.

Data on Wednesday showed Australian inflation jumped to a 33-year high last quarter as travel and electricity costs jumped, a shock result that bolsters the case for the country’s central bank to raise interest rates again next month. .



Please enter your comment!
Please enter your name here