Oil Gains Momentum On China Economic Claims As "Big Pop" In Demand Predicted
Meanwhile, Finnish think tank says Russian sanctions are having a big impact: File Image/Pixabay.
The upward momentum of oil prices escalated on Wednesday, with two key benchmarks rising over 3 percent on the strength of emerging optimism about the global economy – and despite a rise in U.S. crude inventories that was warned of in the previous session by the American Petroleum Institute.
Brent settled up $2.57, or 3.2 percent, at $82.67 per barrel, and West Texas Intermediate settled up $2.29, or 3.1 percent, at $77.41 per barrel, after China's Ministry of Industry and Information Technology claimed that the country's industrial output is expected to have grown 3.6 percent in 2022 from the previous year, despite production disruptions from Covid curbs.
Even though many critics say data issued by the Chinese Communist Party should be taken with a grain of salt, oil analysts took the news at face value: "Energy traders should get used to seeing oil prices head higher," said Edward Moya, senior market analyst at Oanda Corp., adding that "Oil demand is coming back and expectations are high that China's demand is about to skyrocket."
Ed Moya, senior market analyst, Oanda Corp
Get used to seeing oil prices head higher
The news effectively eclipsed impact from the disclosure by the Energy Information Administration that crude inventories jumped by 19.0 million barrels last week, the third biggest weekly gain ever and the most since stocks rose by a record 21.6 million barrels in Feb 2021.
Also on Wednesday, Goldman Sachs Group Inc. told media that Brent could reach $110 per barrel by the third quarter if China and other Asian economies fully reopen from coronavirus restrictions.
Jeff Currie, the bank's global head of commodities research said in a Bloomberg Television interview, "What is idled? Planes, trains and automobiles. You turn them all back on, that's going to be a big pop in oil demand."
In other oil related news on Wednesday, Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air, said, "The European Union's oil ban and the oil price cap have finally kicked in and the impact [on Russia] is as significant as expected."
She made the remark in the wake of her organization releasing a report that showed the first month of the European Union's ban on seaborne imports of Russian crude and the G-7′s price cap had cost Moscow an estimated 160 million euros ($171.8 million) per day.
The report credited the Western measures for a 17 percent fall in Russia's earnings from fossil fuel exports in the final month of 2022.
Meanwhile, all eyes are on U.S. inflation and earnings figures due on Thursday, with the hope that they will indicate a resilient economy: the theory is that if inflation is below expectations, it would drive the dollar lower, which in turn could boost oil demand because it makes crude cheaper for buyers holding other currencies.