Oil Rises 2% on Expected Rise in China’s Economy
By Adedapo Adesanya
Oil rose nearly 2 per cent on Tuesday, erasing the previous session’s losses, as hopes for a strong economic rebound in China offset.
Brent crude settled higher by $1.44 or 1.8 per cent at $83.89 a barrel, while the US West Texas Intermediate (WTI) crude futures gained $1.37 or 1.8 per cent to close at $77.05 a barrel.
For the month of February, Brent fell about 0.7 per cent, while WTI dropped about 2.5 per cent.
Expectations of demand recovery in China underpinned gains, with the market awaiting key data this week. There is anticipation that factory activity in the world’s second-largest economy grew in February.
Prices are expected to rise above $90 a barrel toward the second half of 2023 as Chinese demand recovers, and Russian output falls.
Gains were capped by the threat of more US rate increases after stronger-than-expected new orders for core US capital goods in January.
This is as the US Federal Reserve Governor Philip Jefferson said inflation for services remained stubbornly high, with market analysts maintaining that this could lead to a 0.50 per cent increase in interest rates by the Fed in March.
The Organisation of the Petroleum Exporting Countries (OPEC) has pumped 28.97 million barrels per day this month, up by 150,000 barrels per day from January. Output is still down more than 700,000 barrels per day from September.
Meanwhile, in the US, crude production fell in December to 12.10 million barrels per day, its lowest since August 2022, Energy Information Administration (EIA) data showed.
However, US crude stockpiles have been growing and were forecast to post a 10th consecutive week of builds.
US crude oil inventories rose by about 6.2 million barrels in the week ended February 24, according to market sources citing American Petroleum Institute (API) figures on Tuesday.
SPR inventory held steady for the seventh week in a row at 371.6 million barrels—the lowest amount of crude oil in the SPR since December 1983.
The Biden Administration previously announced that there would be further releases from the SPR in the amount of 26 million barrels after the stockpiles dropped by 221 million barrels last year.
Meanwhile, official US government data on stockpiles is due on Wednesday.