By Adedapo Adesanya
The oil market appreciated by 3 per cent on Wednesday as hopes for an improved global economic outlook and concern over the impact of sanctions on Russian crude output spurred a positive move for the market.
Brent futures rose by $2.57 or 3.2 per cent to trade at $82.67 per barrel, as the US West Texas Intermediate (WTI) crude increased by $2.29 or 3.1 per cent to settle at $77.41 per barrel.
This was both benchmarks’ highest since December 30, with the global benchmark Brent up for a third day in a row for the first time since December, while WTI was up for a fifth day in a row for the first time since October.
The market banked on hopes that inflation and earnings figures in the world’s largest economy, the US, due on Thursday, will indicate a resilient economy and result in a slower pace of interest rate hikes.
If inflation comes in below expectations, analysts said that it would drive the US Dollar lower, which could boost oil demand because it makes crude cheaper for buyers holding other currencies.
The Federal Reserve will likely hike its target interest rate for the last time at its January 31 to February 1 monetary policy meeting, raising it by 50 basis points to a range of 4.75 per cent-5.00 per cent.
China’s expected demand push also helped the market after the top oil importer reopened its economy after the end of strict COVID-19 curbs.
Passenger vehicle sales and industrial output are set to rise in the world’s second-largest economy, despite the disruption from the recent COVID-19 curbs.
The US Energy Information Administration (EIA) reported an inventory build of 19 million barrels for the first week of the new year.
At 439.6 million barrels, inventories of crude have turned about 1 per cent above the average for this time of the year.
The report follows a moderate build of 1.7 million barrels for the last week of 2022, as reported by the EIA, and another, even smaller build of 700,000 barrels for the week before that.
A day before the EIA’s report came out, the American Petroleum Institute (API) estimated that crude oil inventories in the US had added an impressive 14.87 million barrels in the first week of 2023.
Meanwhile, an international price cap imposed on sales of Russian crude took effect on December 5, and more curbs aimed at product sales are set to come into force next month as the European Union (EU) keeps working on more sanctions against Moscow over the invasion of Ukraine.
The EIA said the upcoming EU ban on seaborne imports of petroleum products from Russia on February 5 could be more disruptive than the EU ban on seaborne imports of crude oil from Russia implemented in December 2022.
Modupe Gbadeyanka