Bearish Signals Ignored, Oil Gains on China Economic Optimism
Meanwhile, Russia continues to navigate hostile waters: File Image/Pixabay
Oil trading on Wednesday continued to be governed entirely by sentiment, with prices rising
slightly due to news that manufacturing activity has risen for the first time in months in China.
This finally offset concerns of growing inventories and interest rate hikes - both of which signalled a bearish turn in the market and led to price losses these past few weeks.
Brent settled up 86 cents, or 1 percent, to $84.31 per barrel, and West Texas Intermediate settled up 64 cents, or 0.8 percent, to $77.69 after it was learned that while China's official manufacturing purchasing managers' index climbed to 52.6 last month from 50.1 in January, a private sector survey also showed activity rising for the first time in seven months.
Yeap Jun Rong, market strategist at IG, said, "Another round of upside surprise in China's PMI further provides conviction of a stronger than expected recovery, which supports a more optimistic oil demand outlook."
Stephen Brennock, analyst, PVM
This can only be a positive driver for oil prices
Still, given other news on Wednesday is was unclear why oil traders felt suddenly optimistic, especially considering that in the previous session they caused prices to fall the most in about a month after government data showed U.S. crude inventories swelled to the highest levels since June 2021.
U.S. crude inventories rose by 1.2 million barrels last week to 480.2 million barrels, the 10th straight weekly increase; also, Russia's oil production reached the pre-sanctions level for the first time in February, and the Organization of the Petroleum Exporting Countries' (OPEC) production also rose.
Yet, these factors were largely overlooked: "China's economy is rebounding now, and this can only be a positive driver for oil prices," said Stephen Brennock, analyst at PVM.
Meanwhile, the latest in the murky saga of Russia's attempts to prevail despite the European Union sanctions was news that STS loadings of Russian Urals crude hit a record high in the Mediterranean in January as traders moved cargoes onto larger vessels, in order to make long-haul shipments to Asia more cost-effective.