Unstoppable China Optimism Inspires More Gains For Oil

Meanwhile, the efficacy of the EU sanctions continues to be questioned: File Image/Pixabay

The expectation among crude traders that China's economy will rebound due to the abandonment of the country's zero-tolerance Covid policy continues to build and was responsible for another round of gains for the commodity on Tuesday.

After it was learned by the trading and analytical communities that China's gross domestic product expanded 3 percent in 2022, Brent settled up $1.46, or 1.7 percent, to $85.92 while West Texas Intermediate settled up 32 cents, or 0.4 percent, at $80.18.

Ironically, China's GDP numbers missed the official target of around 5.5 percent and amounted to the second-worst performance since 1976 – although traders took solace in the fact that the data still beat analysts' forecasts as the country abandoned its zero tolerance policy.

Bob Yawger, director of energy futures at Mizuho, said, "China is making the best out of their economic data, and it's fair to say it could have been worse."

Still, Tamas Varga, an analyst at PVM, pointed out that "The country's crude oil imports were up 4 percent in December and a considerable demand boost for transportation fuel...is anticipated when the Lunar New Year begins on Sunday."

Also, data released on Tuesday showed that daily oil throughput in China in December rose to the second-highest level of 2022.

Meanwhile, analysts hoping for clarity regarding a possible easing of U.S. Federal Reserve lending policies were disappointed on Tuesday by a survey from the bank showing that New York state manufacturing contracted sharply in January, and little improvement was expected over the next six months.

John Kilduff, founding partner at Again Capital, said, "The question is how does the Federal Reserve respond to such a mixed bag of economic performance."

As for the ongoing saga of analysts either portraying the European Union sanctions against Russia as powerful or a complete failure, Tuesday saw Péter Szijjártó, foreign minister to Hungary, argue that the sanctions have damaged the EU members' economies more than their target's and failed to stop the war in Ukraine.

He said, "Because what was the expectation at the beginning of March, end of February, when we discussed the first package of sanctions? That they will put Russia's economy on its knees, therefore the war will be stopped soon.

"Russia's economy is not on its knees, definitely; we can have different assessments of how badly they perform but they're not on their knees, and the war is not coming to its end - and Europe's economy is suffering more from sanctions than the Russian economy."