Oil prices rose on Friday, finishing on the rise for the second week in a row, thanks to investors’ optimism about oil demand in China.
Refining companies in China increase their purchases of oil, hoping for an increase in energy consumption in the country after the lifting of quarantine restrictions, notes Bloomberg.
“Prices are rising amid continued optimism about China’s prospects,” said Charu Chanana, an analyst at Saxo Capital Markets in Singapore. – Signals that the country’s COVID-19 incidence has peaked reinforce expectations for a more sustained rise in demand.”
March Brent crude futures on London’s ICE Futures exchange stood at $86.26 a barrel by 7:15 a.m. Friday, up $0.1 (0.12%) from the previous session’s close. Those contracts rose $1.18 (1.4%) to $86.16 a barrel at the close of trading on Thursday.
The price of WTI futures for February at electronic trades of the New York Mercantile Exchange (NYMEX) increased by that time by $0.17 (0.21%) up to $80.5 per barrel. By closing of previous trades the cost of those contracts grew by $0.85 (1.1%) to $80.33 per barrel.
The previous day the US DOE data showed an unexpected and sharp increase of oil reserves in the USA. The indicator grew by 8.41 mln barrels up to 4483.02 mln barrels while experts interviewed by Bloomberg expected a 3 mln barrel decline of reserves.
Gasoline inventories rose 3.48 million barrels, compared to an expected increase of 2.4 million barrels.
“The inventory data was significantly different from what the market was expecting,” said Tyche Capital Advisors expert Tariq Zahir. – Nevertheless, we expect prices to rise further given the opening of the Chinese economy, the situation in Ukraine (Russia’s full-scale war against Ukraine – IF) and the fact that the US government needs to replenish the strategic oil reserve.”
Oil is cheapening fast on Thursday morning after declining the day before. Investors are evaluating signals about increase of fuel reserves in the USA and statements of representatives of the Federal Reserve.
The cost of March futures on the Brent crude at London’s ICE Futures Exchange stood at $83.83 per barrel by 7:16 a.m., down $1.15 (1.35%) from the close of the previous session. At the close of trading on Wednesday those contracts fell by $0.94 (1.1%) to $84.98 per barrel.
The price of WTI futures for February at the electronic trading on the New York Mercantile Exchange (NYMEX) is $78.2 per barrel by that time, which is $1.28 (1.61%) lower than at the end of the previous session. The contract fell by $0.7 (0.9%) to $79.48 per barrel at the end of last session.
The day before oil had had a volatile session: during the trading quotations reached new highs since early December, but then went down on statements of James Ballard, head of Federal Reserve Bank of St. Louis.
Ballard told The Wall Street Journal that the U.S. central bank should continue raising the benchmark interest rate in order to get inflationary pressures down, despite recent statistical data pointing to a slowing economy.
“Such words have heightened fears that the Fed could raise the rate again by 50 basis points at its next meeting,” said Phil Flynn, senior market analyst at The Price Futures Group.
Moreover, the American Petroleum Institute (API) data, released Thursday night, showed a 7.6 million-barrel increase in U.S. oil inventories last week. A week earlier, reserves rose 14.87 million barrels.
The official report of the U.S. Department of Energy will be released Thursday at 6:00 p.m., a day later than usual due to the Martin Luther King Day holiday on Monday. Analysts polled by WSJ forecast that oil reserves fell by 1.1 million barrels for the week ended Jan. 13. The survey was conducted before the API data was released.
Oil prices are rising in trading on Wednesday amid continuing hopes for a rebound in demand from China after the removal of anti-coveting restrictions.
The cost of March futures on London’s ICE Futures Exchange is $86.56 per barrel by 7:13 a.m. (EET), which is $0.64 (0.74%) above the previous session’s closing price. At the close of trading on Tuesday those contracts grew by $1.46 (1.73%) to $85.92 per barrel.
The price of WTI futures for February at electronic trades of the New York Mercantile Exchange (NYMEX) is $80.83 per barrel by that time, which is $0.65 (0.81%) above the final value of the previous session. At the end of trading on Tuesday the contract grew by $0.32 (0.4%) up to $80.18 per barrel.
China’s Vice Premier Liu He announced at the World Economic Forum in Davos that China was open for global cooperation after three years of isolation caused by the COVID-19 pandemic. According to him, the peak of the coronavirus infection in the country and the economic recovery came earlier than the government expected.
China’s economy reportedly expanded by 2.9% in the fourth quarter of 2022 compared to the same period last year, according to data from the State Statistics Office (SSO). Thus, the growth rate slowed significantly from 3.9% in the third quarter.
Meanwhile, the figure exceeded analysts’ expectations, who on average predicted a 1.8% increase in Chinese GDP in October-December, Trading Economics reported.
OPEC improved its estimate of global oil demand in the first quarter of 2023 by 160,000 bpd from its previous forecast to 101.04 million bpd, the cartel’s monthly report showed.
“Slight upward adjustments were made due to an expected improvement in China’s economic performance amid its re-emerging from COVID-19 restrictions, while other regions are expected to see slight declines due to economic problems that are likely to affect oil demand,” the report said.
Meanwhile, forecasts for 2022 and 2023 remained unchanged at 99.55 million bpd and 101.77 million bpd, respectively.
Traders are now waiting for the International Energy Agency’s (IEA) monthly survey, which will be released Wednesday.
Oil prices are declining Monday morning after a significant rebound last week, driven by optimism over the impact of the lifting of coronavirus restrictions in China on fuel demand in the country and the world.
The value of March futures for Brent at London’s ICE Futures Exchange stood at $84.66 a barrel by 7:10 a.m. Kk, down $0.62 (0.73%) from the close of the previous session. At the close of trading last Friday those contracts grew by $1.25 (1.5%) to $85.28 per barrel.
The price of WTI futures for February at electronic trades of the New York Mercantile Exchange (NYMEX) is $79.35 per barrel by that time, which is $0.51 (0.64%) lower than the final value of the previous session. The contract rose by $1.47 (1.9%) to $79.86 per barrel at the end of last session.
Brent gained 8.3% and WTI gained 8.5%. Both contracts ended trading at the highest levels since the beginning of the year.
The opening of the Chinese economy “was the most important factor behind the growth in oil prices last week”, and data on declining inflation in the U.S. also added to investors’ optimism about the American economy, the president of Strategic Energy & Economic Research Michael Lynch said.
In addition, prices were supported by the weakening of the dollar, the expert added.
This week, traders’ attention will focus on the monthly reports of OPEC and the International Energy Agency, which will be released on Tuesday and Wednesday, respectively, Trading Econimics noted.
Meanwhile, the number of active oil rigs in the U.S. rose by five last week to 623, oil services company Baker Hughes said. The number of gas rigs dropped by two, to 150.
Oil prices are down on Friday, but finished the week with a strong increase due to signals of increased demand in China.
Chinese authorities significantly raised oil import quotas for local companies, which suggests that refineries are about to increase production.
Investor optimism about the prospects for the U.S. economy provides additional support to the market, notes Bloomberg. Statistics data published the day before showed a slowdown in inflation in the U.S., which reinforced expectations of an imminent end to the cycle of base interest rate increases in the country.
The cost of March futures for Brent crude oil on London’s ICE Futures exchange was $83.67 a barrel by 7:15 a.m. on Friday, down $0.36 (0.43%) from the previous session’s closing price. Those contracts rose $1.36 (1.7%) to $84.03 a barrel at the close of trading on Thursday.
The price of WTI futures for February crude oil at electronic trades of NYMEX fell by $0.22 (0.28%) by that time to $78.17 per barrel. By closing of previous trades these contracts grew by $0.98 (1.3%) to $78.39 per barrel.
U.S. consumer prices (CPI) rose 6.5% in December from a year earlier, the Labor Department said Thursday. Thus, inflation slowed from 7.1% in November, the lowest since October 2021. Consumer prices fell 0.1% from the previous month, the first month-over-month decline since 2020.
“The inflation data show that the Fed is probably almost done with the rate hike and the U.S. economy will be able to avoid a recession,” notes OANDA chief analyst Edward Moya, quoted by Market Watch.
Oil prices are stable in trading on Thursday after a strong growth in the previous session, despite an unexpected increase in inventories in the USA.
The market is supported by the growing optimism of traders about the prospects for fuel demand in China. As noted by Bloomberg, Chinese companies are actively buying oil before the long holiday on the occasion of the Lunar New Year, which this time comes at the end of January.
“Investors are more focused on the global demand picture than energy stock data,” notes Tortoise portfolio manager Brian Kessens. – The focus is on China, which is likely to be the main driver of oil consumption growth in the first quarter.”
The cost of March futures on Brent on London stock exchange ICE Futures is $82,7 per barrel by 7:10 a.m. KSC on Thursday which is by $0,03 (0,04%) higher than the price on previous session closing. At the close of trading on Wednesday those contracts rose by $2.57 (3.2%) to $82.67 a barrel.
The price of WTI futures for February increased by $0.02 (0.03%) up to $77.43 per barrel at electronic trades of NYMEX. By the close of previous trading the cost of those contracts rose by $2.29 (3.1%) to $77.41 a barrel.
U.S. commercial oil inventories rose 18.96 million barrels to 439.61 million barrels last week, the Energy Department said Wednesday. Experts polled by Bloomberg agency expected on average a decrease of 2 million barrels, respondents of S&P Global Commodity Insights – by 500,000 barrels.
The increase in oil inventories is probably due to a temporary reduction in production by U.S. refineries at the end of last month due to frost, notes Market Watch. The current inventory level is about 1% higher than the five-year average.
