China Optimism Swings Back Full Force, Oil Ends With Weekly Gains

Meanwhile, Russia's exports continue to impress: File Image/Pixabay

Friday’s crude trading saw investors suddenly optimistic again over China, to the point where they were able to temporarily overlook their ongoing fears about further bank interest rate hikes and caused oil prices to achieve  a healthy weekly gain.

However, at least one analyst suggested that trading moving forward would be painstaking and influenced by micro rather than macro events.

Brent on Friday settled up 94 cents to $76.61 per barrel and gained 2.4 percent on the week; West Texas Intermediate settled up $1.16 to $71.78 and rose 2.3 percent on the week.

After repeated losses these past few weeks due to the perception that China’s post-lockdown economic recovery was disappointing, traders responded eagerly to news that the country’s refinery throughput rose in May to its second-highest total on record.

Also, Kuwait Petroleum Corp.'s CEO said he expected Chinese demand to keep climbing during the second half of this year: Sheikh Nawaf Saud al-Sabah remarked, "We see that from our customers our customers in China, our largest customer for KPC for crude oil, those customers continue to demand at least similar amounts of crude if not more and it is a harbinger, if you will, of continued good demand."

This came on the heels of China deciding to cut rates and hinting at further stimulus measures, which contributed to the positive sentiment in the oil market.

Traders even exhibited a delayed positive response to voluntary output cuts in May by the Organization of the Petroleum Exporting Countries (OPEC), as well as an additional cut by Saudi Arabia in July – the latter of which was previously deemed a bust in terms of swaying investment sentiment.

Well aware that crude traders are among the most fickle traders of all, Phil Flynn, senior market analyst at Price Futures Group Inc., said with regards to recent news that the U.S. Federal Reserve will enact at least a half of a percentage point increase by year-end, "We're going to be going from Fed speaker to Fed speaker, and data point to data point."

Ed Moya, senior market analyst at Oanda Corporation, cited another factor that would influence trading patterns in the days and weeks to come: “The oil market is very fragile, and refinery outages will disrupt the rebound that is starting to take hold for crude prices.”

Refinery outages in the U.S. and Europe are threatening to further increase crude inventories at key hubs where stockpiles already are at the highest in two years.

In other oil related news on Friday, Russia’s oil exporting success despite the international sanctions against it for invading Ukraine continued to impress: Sydney Casey, analyst at Mansfield, noted  that “As Russian refineries resume operations post-maintenance, seaborne exports of fuels, including diesel and naphtha, are projected to rise this month; the first ten days of June already saw a 51,000 barrel per day [bpd] increase in shipments of refined crude products as compared to May.”

Casey added that, “These exports remain under the microscope as Russia had earlier pledged to cut oil production by 500,000 bpd in response to sanctions.”