Oil Swings Back To Positive As China Strategizes To Boost Economy

Meanwhile, Russia's seaboard exports are starting to diminish: File Image/Pixabay

The roller coaster crude trading patterns caused by investors shifting focus from fundamentals to interest rate hike concerns from one day to the next resulted in a 2 percent-plus rise  for the commodity on Tuesday, as rising demand hopes trumped financial concerns.

Brent rose $1.71, or 2.2 percent, to settle at $79.40 per barrel, while West Texas Intermediate rose $1.84, or 2.5 percent, to settle at $74.83.

Tuesday’s turnabout was propelled by a surprise move from China, which announced it was cutting short-term interest rates and considering a range of stimulus measures to counteract a tepid economic recovery from its Covid lockdowns.

Also, some analysts held out hope that the U.S. Federal Reserve would pause interest rate hikes based on data showing that the rate of inflation in that country slowed in May.

Meanwhile, Michael Kern, analyst at Oilprice.com, speculated that, “there is a growing sense the market is starting to feel Saudi Arabia’s production cuts and Russia’s export curbs: hedge fund net positioning in the ICE Brent contract went up by the equivalent of 25 MMbbls last week, the largest week-on-week build in two months, pointing at a potential short-term pricing upside.”

Additionally, even though Goldman Sachs Group Inc. lowered its oil price forecasts for the third time in six months due to a perceived swelling of supplies and waning demand, more positive news on Tuesday came in the form of vessel tracking data revealing that seaborne crude flows fell to 2.86 million barrels per day (bpd) in the week to July 9, more than 1 million bpd lower than the previous week and 80 percent of the decline coming from western Russia.

Bloomberg noted that, “The smaller volumes undermined the Kremlin’s income from export taxes, which fell by 29 percent last week compared with the one before.”

In other oil related news on Tuesday, Rystad Energy reported that well intervention - a way to extract additional resources from an existing well instead of drilling a new one - spending is projected to increase by 20 percent in 2023, and the trend will accelerate to reach 17 percent in 2027 (totalling about 260,000 wells globally) as efficiency becomes a paramount industry focus.

Jenny Feng, supply chain analyst at Rystad, said, “As a quick, efficient, and cost-effective method of maximizing existing resources, interventions are going to be a hot topic in the years to come.”