Benchmark crude oil is moderately expensive Wednesday morning after rising to weekly peaks the day before, driven by hopes for a recovery in demand in China and fears of supply disruptions due to an earthquake in Turkey.
The price of April futures for Brent on London’s ICE Futures Exchange stood at $83.78 a barrel by 7:20 a.m., $0.09 (0.11%) higher than at the close of the previous session. Those contracts rose by $2.7 (3.3%) to $83.69 a barrel at the close of trading on Tuesday.
The price of WTI futures for March at electronic trades of the New York Mercantile Exchange (NYMEX) is $77.35 per barrel by that time, which is $0.21 (0.27%) above the final value of the previous session. The contract rose by $3.03 (4.1%) to $77.14 a barrel, the highest since January 31.
As earlier reported, the work of Turkish Ceyhan oil terminal was suspended after the earthquake that killed over 7,000 people in Turkey and Syria.
In addition, the market continues to assess the words of the head of the International Energy Agency (IEA) Fatih Birol that China’s economic recovery may proceed at a faster pace than expected, which in turn will lead to a global increase in demand for oil and LNG.
Meanwhile, American Petroleum Institute (API) data released on Tuesday night showed a 2.18 million barrel decline in U.S. inventories for the week ended February 3.
The official report on U.S. energy reserves will be released Wednesday at 5:30 p.m. Analysts polled by Trading Economics expect an average increase of about 2.5 million barrels of oil reserves.
Oil prices stabilized on Monday after a sharp drop last week.
The value of April futures for Brent on London’s ICE Futures Exchange stood at $80.14 a barrel by 7:15 a.m. Monday, $0.2 (0.25%) above the previous session’s closing price. Those contracts fell $2.23 (2.7%) to $79.94 a barrel at the close of trading on Friday.
The price of WTI futures for March increased by $0.09 (0.12%) to $73.48 per barrel at electronic auctions of New York Mercantile Exchange (NYMEX). By closing of previous trades the cost of these contracts went down by $2.49 (3.3%) to $73.39 per barrel.
Brent has fallen by 7.5% and WTI by 7.9%.
The market decline was helped by the weakening optimism of traders regarding the demand growth in China after the lifting of the anti-crisis restrictions, as well as strong data on the US labor market, which showed that the Federal Reserve (Fed) still has some room for maneuver in terms of tightening its monetary policy.
Over the weekend, however, Fatih Birol, head of the International Energy Agency, told Bloomberg that China’s economic rebound after the rejection of harsh quarantine measures may be more powerful than expected.
According to Birol’s forecast, the Chinese economy will account for about half of the growth in oil demand this year.
Another factor the market is closely watching is the EU and G7 decision to impose an embargo on oil product imports from Russia, which came into force on February 5.
Oil prices continued to decline on Friday, ending in minus territory for the second week in a row amid some weakening of traders’ optimism about demand prospects in China and the continuing growth of US inventories.
April Brent crude futures on London’s ICE Futures exchange stood at $82.01 a barrel by 7:10 a.m. Friday, down $0.16 (0.19%) from the previous session’s closing price. Those contracts fell $0.67 (0.8%) to $82.17 a barrel at the close of trading on Thursday.
The price of WTI futures for March crude oil at electronic trades of NYMEX fell by $0.16 (0.21%) by that time to $75.72 per barrel. By closing of previous trades these contracts have dropped by $0.53 (0.7%) to $75.88 per barrel.
Both Brent and WTI ended trading Thursday at their lowest levels since Jan. 10.
Since the beginning of this year, oil has been trading in a range of about $10 a barrel. On the one hand, the market is waiting for an upswing in demand in China after the lifting of quarantine restrictions in the country, on the other hand – it fears a decline in activity in developed countries in connection with the continued increase of interest rates by leading global central banks, said Bloomberg.
In addition, from next week the EU embargo on the supply of Russian oil products, introduced in response to the continuation of Russia’s full-scale war against Ukraine and accompanied by the initiative of the price ceiling, will come into effect, and traders will wait for the consequences of this decision.
“The oil market is in limbo, waiting for tangible signs of demand growth in China,” notes Vanda Insights founder Vandana Hari. – The factor of the ban on Russian oil products to the EU is not the main one, but it still creates some uncertainty.”
Oil prices are actively rising on Thursday morning, recovering after falling to a three-week low the day before on data on another increase in U.S. fuel inventories.
The price of April futures for Brent on London’s ICE Futures Exchange stood at $83.55 a barrel by 7:05 a.m., $0.71 (0.86%) above the previous session’s closing price. Those contracts fell by $2.62 (3.1%) to $82.84 per barrel at the close of trading on Wednesday.
The price of WTI futures for March at electronic trades of the New York Mercantile Exchange (NYMEX) is $77.17 per barrel by that time, which is $0.76 (0.99%) above the final value of the previous session. The contract fell by $2.46 (3.1%) to $76.41 a barrel at the previous session, its lowest level since January 10.
The day before the US Department of Energy announced that crude stocks in the country grew by 4.14 mln barrels last week. Growth rate has been recorded for six weeks in a row. Analysts polled by Bloomberg expected a decrease in oil reserves by 1 million barrels.
Meanwhile, marketable gasoline reserves rose by 2.58 million barrels and distillates by 2.32 million barrels. Experts had expected gasoline inventories to increase by 2 million barrels and distillate inventories to decrease by 1.5 million barrels.
“The Department of Energy data pointed to an unexpected increase in inventories of all fuels,” said Tariq Zahir, managing partner at Tyche Capital Advisors. The weakness in the oil market may well last, and additional declines will be an opportunity to open long positions, he added.
Also on Wednesday, it became known that the ministers of the monitoring committee of OPEC+ (JMMC), considering the data on production for November and December 2022, recommended not to change the quotas on oil production. The next JMMC meeting is scheduled for April 3, 2023.
In addition, a key event for global markets was the Federal Reserve’s first meeting of the year. The Fed expectedly raised its key interest rate by 25 basis points and said it expects more rate hikes to return inflation to its 2% target.
“Those statements sounded pretty hawkish,” said Tyche Capital’s Zaheer.
Oil prices are rising Wednesday ahead of the release of the results of the Federal Reserve (Fed) meeting as well as the results of the OPEC+ meeting.
The Fed is expected to raise its benchmark rate by 25 basis points (bps) on Wednesday, signaling a further slowdown in the rate hike.
Ministers of the OPEC+ monitoring committee (JMMC) will meet Feb. 1 to discuss the oil market situation. Most experts do not expect any new decisions following this meeting, notes Bloomberg.
The cost of April futures for Brent oil on London’s ICE Futures exchange by 7:15 a.m. on Wednesday is $85.66 per barrel, which is $0.2 (0.23%) higher than the price at the close of the previous session. Those contracts rose $0.96 (1.1%) to $85.46 a barrel at the close of trading on Tuesday.
The price of WTI futures for March increased by $0.32 (0.41%) to $79.19 per barrel at electronic trades of NYMEX. By closing of previous trades the cost of these contracts grew by $0.97 (1.3%) to $78.87 per barrel.
In January both Brent and WTI have fallen in price by about 1.7%. It was the third straight month of decline, despite increased investor optimism about demand prospects in China following the lifting of quarantine restrictions in the country.
“The oil market seems to have found a steady footing,” notes Yep Jun Rong, an analyst at IG Asia Pte in Singapore. – Nevertheless, any hawkish signals from the Fed on Wednesday could bring back downward pressure.”
The American Petroleum Institute (API) data released Tuesday night showed a 6.33 million barrel increase in U.S. oil inventories for the week ended Jan. 27.
The official report on U.S. energy stocks will be released at 5:30 p.m. Wednesday.
Oil prices are moderately lower on Tuesday morning after a sharp decline on Monday, triggered by expectations of interest rate hikes by central banks around the world.
The price of March futures for Brent on London’s ICE Futures Exchange stood at $84.85 a barrel by 7:09 a.m., down $0.05 (0.06%) from the close of the previous session. Those contracts fell $1.76 (2%) to $84.9 a barrel at the close of trading on Monday.
The price of WTI futures for March at electronic trades of the New York Mercantile Exchange (NYMEX) makes $77.54 per barrel by that time, which is $0.36 (0.46%) lower than the final value of the previous session. At the end of last session, the contract fell by $1.78 (2.2%) to $77.98 per barrel.
This week will be the first meetings of the world’s leading central banks – the U.S. Federal Reserve, European Central Bank and Bank of England. The Fed is expected to slow the pace of key rate hikes to 25 basis points from 50 bps in December, and the ECB and Bank of England will again increase borrowing costs by 50 bps.
“A hawkish attitude toward further rate hikes will cause weakness in the oil and oil products market,” StoneX analysts wrote in a letter to clients.
Traders are also trying to take a cautious approach ahead of Wednesday’s next OPEC+ ministerial meeting.
The OPEC+ committee is unlikely to signal any changes in production “given the continued certainty in the market, both on the demand and supply side,” ING strategists Warren Patterson and Ava Manty said.
