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.
Oil prices are declining in trading on Tuesday after a strong rise in the previous session.
The cost of March futures on London’s ICE Futures Exchange for Brent is $79.16 a barrel by 7:08 a.m. (EET) on Tuesday, down $0.49 (0.62%) from the close of the previous session. At the close of trading on Monday those contracts grew by $1.08 (1.37%) to $79.65 a barrel.
The price of WTI futures for February crude oil at electronic trades of NYMEX fell by that time by $0.40 (0.54%) to $74.23 per barrel. By closing of previous trades the cost of these contracts grew by $0.86 (1.17%) to $74.63 per barrel.
Brent has fallen by 8.5% and WTI by 8.1% at the end of the previous week.
Pressure on the oil market was put by “hawkish” statements by representatives of the U.S. Federal Reserve (Fed), Trading Economics wrote. Mary Daley, head of the Federal Reserve Bank (FRB) of San Francisco, said she thinks the U.S. central bank will have to raise the rate above 5% to fight inflation.
“I think a level above 5 percent is absolutely likely,” she told The Wall Street Journal.
Her counterpart at the Atlanta Fed, Rafael Bostic, also reiterated an earlier view that the rate would be raised to more than 5 percent. Currently, its range is 4.25-4.5%.
Investors are also cautious ahead of the Lunar New Year, fearing that increased travel by Chinese citizens could lead to an increase in the incidence of coronavirus worldwide, Trading Economics noted.
Oil prices rise on Monday after a significant decline in the past week.
The price of March futures for Brent oil on the London ICE Futures exchange by 7:10 qoq on Monday is $79.45 per barrel, which is $0.88 (1.12%) higher than the closing price of the previous session. As a result of trading on Friday, these contracts fell by $0.12 (0.2%) to $78.57 per barrel.
The price of futures for WTI oil for February in electronic trading on the New York Mercantile Exchange (NYMEX) increased by this time by $0.89 (1.21%), to $74.66 per barrel. By the close of previous trading, the cost of these contracts increased by $0.1 (0.1%) to $73.77 per barrel.
As a result of the past week, Brent fell by 8.5%, WTI – by 8.1%.
Traders are evaluating the prospects for oil demand in China, where the incidence of COVID-19 has increased since the lifting of quarantine restrictions. In addition, fears of a downturn in the global economy remain in the context of the ongoing tightening of monetary policy by the world’s largest central banks.
Pressure on the oil market last week was exerted by the strengthening of the US dollar, lower natural gas prices, as well as the risks of a recession in the world, said Troy Vincent, chief analyst at DTN.
“Warm weather and falling gas prices dampen expectations that consumers will switch from gas to oil this winter,” Market Watch quoted Vincent as saying. “The increase in economic activity in China following the lifting of anti-COVID restrictions is the main factor that could push oil demand to growth. However, there remains serious uncertainty about the timing of the return of the PRC economy to normal activity.”
Oil prices are declining amid fears of a downturn in the global economy and lower energy demand, Trading Economics reported.
This year will be tougher for the global economy than last year, International Monetary Fund (IMF) Managing Director Kristalina Georgieva said. “We expect a third of the world economy to be in recession,” she said in an interview with CBS.
March Brent crude futures on London’s ICE Futures exchange were priced at $85.51 a barrel at 7:00 ksk, down $0.4 (0.47%) from the previous session’s closing price.
The price of futures on WTI crude oil for February on electronic trade of the New York Mercantile Exchange (NYMEX) decreased by that time by $0.35 (0.44%) – to $79.91 per barrel.
By the end of 2022 Brent quotations went up by about 10%, WTI – by 7%.
The company’s oil price is expected to remain stable on the last working day of the year amid low trading activity, ending the fourth quarter in negative territory, Interfax-Ukraine news agency Interfax reported on Thursday (Dec 2).
Fears that a sharp lifting of quarantine restrictions in China, which has already led to an increase in the incidence of COVID-19, will weaken the country’s economy and, consequently, the demand for oil, put pressure on the market. In addition, investors do not rule out a new wave of coronavirus infection in the world.
Earlier, the Chinese authorities announced that they would resume issuing documents for tourists wishing to travel abroad. The United States and Italy have already announced additional requirements for passengers arriving from China.
Data from the U.S. Department of Energy, released on Thursday, showed an unexpected increase in the country’s oil reserves last week. Reserves rose by 718,000 barrels, while analysts polled by Bloomberg agency forecast an average decline of 1.2 million barrels.
Gasoline inventories decreased by 3.1 million barrels and distillates increased by 283,000 barrels.
The value of March futures on Brent crude oil on London’s ICE Futures Exchange by 7:15 am on Friday stands at $83.8 per barrel, which is $0.34 (0.41%) higher than the price at the close of the previous session. Those contracts fell $0.53 (0.6%) to $83.46 a barrel at the close of trading on Thursday.
The price of WTI futures for February increased by $0.33 (0.42%) up to $78.73 per barrel at electronic trades of NYMEX. By the close of previous trading, those contracts had fallen $0.56 (0.7%) to $78.4 a barrel.
“We have another year ahead of us with serious uncertainty, and the oil market will remain highly volatile,” said Oanda chief analyst Craig Erlam, cited by Bloomberg. – The new year promises many surprises and twists and turns.
