By Adedapo Adesanya
The crude oil market grew on Tuesday as traders weighed plans by the United States government to refill the nation’s emergency oil reserve and anticipated higher seasonal demand.
Brent crude appreciated by 43 cents or 0.6 per cent to trade at $77.44 a barrel, while US West Texas Intermediate (WTI) crude went up by 55 cents or 0.8 per cent to $73.71 a barrel.
The administration of Mr Joe Biden plans to begin purchasing oil to replenish the Strategic Petroleum Reserve (SPR) to cover speculative short positions.
Energy Secretary Jennifer Granholm has said the administration could start buying back crude oil for the Strategic Petroleum Reserve late this year after President Joe Biden last year directed the largest sale yet from the stockpile.
A report from the Energy Information Administration (EIA) pointing to higher seasonal demand and lower-than-expected output also supported prices.
This provided solace for the market, which had a string of bearish news.
US crude oil inventories rose by about 3.6 million barrels in the week ended May 5, according to market sources citing American Petroleum Institute (API) figures on Tuesday.
The official data from the EIA will be released on Wednesday.
Data also showed China’s imports contracted in April while exports rose at a slower pace.
Inbound shipments to the world’s second-largest economy fell 7.9 per cent year on year in April, extending the 1.4 per cent decline seen a month earlier, while exports grew 8.5 per cent, easing from the 14.8 per cent surge in March, Chinese customs data showed on Tuesday.
This reinforced signs of weak domestic demand despite the lifting of COVID curbs and heaping pressure on an economy already struggling in the face of cooling global growth.
The market is also bracing up for the April inflation data, to be released on Wednesday.
The data would give traders a hint about whether more rate hikes will be coming from the Fed after last week’s decision to raise the benchmark by another 25 basis points.
Markets were also monitoring President Biden and top Republican lawmakers’ comments on raising the $31.4 trillion US debt ceiling, fearing an unprecedented default if Congress does not act in three weeks.
Meanwhile, shut-in oil production of more than 300,000 barrels per day in Canada amid the wildfires in Alberta provided some support for prices.
Also, the oil market is bracing up for even more volatility as traders rush to the exits amid continued fears for the state of the US economy and global inflation trends.
