Oil Market Remains Bullish on Continued US Optimism
By Adedapo Adesanya
The oil market traded higher on Thursday by more than one per cent, extending the previous day’s rally as optimism continued over record crude exports in the United States and signs that recession fears are slowing.
Brent crude appreciated by $1.27 or 1.3 per cent to close at $96.96 a barrel, as the West Texas Intermediate (WTI) crude grew by $1.17 or 1.3 per cent to $89.08 a barrel.
Data showed that US crude exports, a hopeful sign for demand, surged to a weekly record of 5.1 million barrels per day, cutting net crude imports to just over 1 million barrels per day, also a record.
The US has ramped up exports sharply in recent years since the Obama administration ended a 40-year ban in 2015.
Speculations that central banks could be nearing the end of rate-hiking cycles added support to the market after the European Central Bank (ECB) raised rates by 75 basis points.
The central bank for the 19 countries that use the Euro raised its deposit rate by a further 75 basis points to 1.5 per cent, the highest rate since 2009.
ECB rates had been negative, below 0 per cent, for eight years until it hiked in July.
It also cut a key subsidy to banks – an attempt to force them to repay early trillions of Euros’ worth of ECB loans, and detailed discussions on winding down the ECB’s huge holdings of mostly government bonds will begin in December.
The US Dollar touched a one-month low, lending oil support, although the US currency rallied later. A weaker dollar makes oil cheaper for holders of other currencies and usually reflects a greater investor appetite for risk.
Prices were limited on worries about Chinese demand limited the rally.
Global investors dumped Chinese assets as the economy of the world’s biggest oil importer was affected by a zero-COVID policy, a property crisis, and falling market confidence.
Now, the US and Western allies are finalising plans to impose a cap on Russian oil prices.
The World Bank has also warned that any plan will need the active participation of emerging market economies.