Oil Traders Suddenly Optimistic Over China But Prices Capped By Demand Worries

Meanwhile, oil sands output is more robust than initially thought: File Image/Pixabay

China, which oil traders for the better part of a year have cited as a major reason for bearish sentiment, suddenly on Thursday caused prices to climb, albeit under 1 percent, as it signalled the potential for sustained demand growth.

Government data from China showed that crude imports rose on the previous year in April, and exports and imports at the same time returned to growth mode.

This came on the heels of Governor Andrew Bailey suggesting that the Bank of England was moving towards lowering interest rates by stating he was "optimistic that things are moving in the right direction."

Moreover, Bloomberg noted that key timespreads that serve as a gauge for supply and demand strengthened to 49 cents after earlier having contracted to near 27 cents earlier this week.

By 1503 GMT on Thursday, Brent rose 40 cents, or 0.5 percent, to $83.98 per barrel, and West Texas Intermediate rose 46 cents, or 0.6 percent, to $79.45.

But Robert Yawger, executive director for energy futures at Mizuho Securities, reiterated earlier concerns about demand in the U.S.: "Gasoline fundamentals heading into summer driving season are supposed to put a big bid in the market heading into summer driving season.

"It is gasoline's time to shine and rally the barrel to seasonal highs….that is not happening this year."

Yawger pointed out that the four-week average is 363,000 barrels per day (bpd) below last year, the lowest for this time of year since 2013 apart from the pandemic in 2020.

In other oil news on Thursday, S&P Global Commodity Insights upgraded its 10-year output for a 15 percent increase in Canadian oil sands production by 2030, to 3.8 million bpd, 500,000 bpd more than currently.

Celina Hwang, director, North American crude oil markets at S&P Global Commodity Insights, said, "Oil sands production continues to grow despite concerns about the advancing federal oil gas emissions cap's potential impact on production."