Still, China's Covid lockdowns causing economic chaos worry analysts: File Image/Pixabay
The roller coaster that defines oil trading in 2022 was on the upswing again on Thursday: investors were initially spooked by the Federal Reserve reaffirming a much tighter monetary policy, and then they caused prices to rise by focusing on a global market whose signs of tightness are omnipresent.
Brent settled up $2.93 at $112.04 per barrel, while West Texas Intermediate settled up $2.62 to $112.21 per barrel.
The schizophrenic nature of trading caused Ed Moya, senior market analyst at Oanda, to remark that "Oil markets remain a volatile trade as crude demand destruction concerns intensify," and he added that given global tightness the fear of a large dent in "short-term crude demand outlook is overdone."
Ed Moya, senior market analyst, Oanda
Oil markets remain a volatile trade
Bill Farren-Price, head of oil and gas macro research at Enverus, added, "Brent seems pinned above $100 but I think the recession risk and all of the concerns about Chinese demand are limiting the upside and will continue to do that."
It didn't help that the global move to punish Russia via sanctions for its invasion of Ukraine continues to be compromised by China and India purchasing huge volumes of deep-discounted oil from the former Soviet Union, and on Thursday it was reported that China is negotiating with Russia to replenish its strategic crude stockpiles.
People with knowledge of the plan told media that the talks are being conducted at a government level and with little direct involvement from oil companies.
Volatility on Thursday was also stoked by reports that China is trying to offset the devastation caused by its zero-tolerance Covid lockdowns by pumping $5.3 trillion into its economy, with even more possibly being spent if the economy fails to pick up.
David Qu, China economist at Bloomberg Economics, said, "The mainstay of policy this year is fiscal spending and government investment, while the central bank is only playing a supportive role so far; there's still a lot of space for a stronger fiscal policy, which is more effective in supporting growth now."
Bloomberg pointed out that while authorities have promised to reach their economic goal, "top leaders have also made it clear they're sticking with Covid Zero, prompting skepticism among economists about whether Beijing can achieve both objectives at the same time."