Oil Rebounds as European Storage Data Signals Positive Demand
By Adedapo Adesanya
Oil rebounded on Thursday after a report of sliding gasoil stocks in Europe ended the volatile sessions triggered by demand worries and a strong US Dollar.
During the trading day, Brent improved its value by 15 cents or 0.2 per cent to $83.36 a barrel, and the US West Texas Intermediate (WTI) crude rose by 16 cents or 0.2 per cent to $79.05 a barrel.
Dutch consultancy firm, Insights Global, posted data that gasoil stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub declined by 3 per cent in the latest week.
This is a good sign for demand, which faces a dent after recent Chinese data didn’t inspire optimism in the market.
Market participants are concerned about the pace of China’s economic growth as the country had been projected to spur a huge chunk of development this year.
Meanwhile, market analysts warned that volatility is likely to persist until investors get clarity on the US Federal Reserve’s next moves. The Jackson Hole Fed meeting, which could shed more light on whether interest rates would remain higher for longer, started on Thursday.
Amid this development, there was a rise in the Dollar against other currencies, and this depressed the market. A stronger greenback makes oil more expensive for holders of other currencies, denting demand.
The global environment is also not friendly as Japan reported shrinking factory activity for a third straight month in August, Eurozone business activity declined more than expected, and Britain’s economy looked set to shrink in the current quarter.
US business activity approached the stagnation point in August, with growth at its weakest since February. However, data also showed that labour market conditions remained tight despite the Fed’s aggressive interest rate hikes.
Also, the market ignored a large US crude draw reported on Wednesday and remained focused on the underwhelming Chinese economic recovery.
On the political front, oil producers in the Organisation of the Petroleum Exporting Countries (OPEC), Saudi Arabia, UAE, and Iran, as well as Argentina, Egypt, and Ethiopia, have received an invitation from the 5-nation BRICS organization to join the bloc at its ongoing summit in Johannesburg, South Africa.
The inclusion of Saudi Arabia and Iran, some of the world’s biggest oil producers outside the US, follows China’s brokering of the normalization of relations between both Gulf states this year.