Adedapo Adesanya
By Adedapo Adesanya
The crude oil market gained about 3 per cent to a one-week high on Thursday on a weaker US dollar, and a jump in refinery runs in top crude importer, China.
Data indicated that Brent rose by $2.47 or 3.4 per cent yesterday to settle at $75.67 a barrel, while the US West Texas Intermediate (WTI) increased by $2.35 or 3.4 per cent to $70.62 per barrel.
The oil market drew support from US reports showing retail sales unexpectedly rose in May, and higher-than-expected jobless claims last week cut the US Dollar to a five-week low versus a basket of other currencies.
A weaker Dollar makes crude cheaper for holders of other currencies, which could boost oil demand.
Data on Thursday also showed China’s oil refinery throughput rose 15.4 per cent in May from a year earlier, hitting its second-highest total on record.
Analysts noted that there are expectations that Chinese oil demand will keep climbing for the remainder of the year.
Despite these projections, the Chinese economy is not recovering as smoothly as initially expected. Retail sales rose by 12.7 per cent year on year in May but slowed by 5.7 percentage points from April, the National Bureau of Statistics of China said on Thursday.
Also, industrial output increased by 3.5 per cent annually in May, slower than the 5.6 per cent growth in April. In addition, unemployment among people aged 16 to 24 hit an all-time high of 20.8 per cent, the Chinese data showed.
However, the International Energy Agency (IEA) continues to be increasingly optimistic about China, saying in its latest monthly report published on Wednesday that “China’s rebound continues unabated, with its oil demand reaching an all-time high of 16.3 million barrels per d in April.”
The IEA raised its global oil demand forecast for this year, expecting demand growth of 2.4 million barrels per day in 2023 to 102.3 million barrels per day, a new record. This latest global oil demand growth estimate is higher than last month’s projection of 2.2 million barrels per day demand growth to 102 million barrels per day.
On the supply side, analysts expect voluntary crude output cuts implemented in May by the Organisation of the Petroleum Exporting Countries (OPEC) and allies (OPEC+) and Saudi Arabia in July to support prices at a time of strong demand.
The European Central Bank (ECB) raised interest rates to a 22-year high as expected on Thursday. It signalled further policy tightening as it battles high inflation.
On Wednesday, the US Federal Reserve kept interest rates unchanged but signalled at least a half of a percentage point increase by the end of the year. These higher interest rates would ultimately increase borrowing costs for consumers, which could slow economic growth and reduce oil demand.
