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Oil rallied at the start of the week on optimism about China’s demand recovery, while investors weighed the potential impact to global energy trade after a ship ran aground in the Suez Canal.
West Texas Intermediate futures climbed above US$75 a barrel yesterday after ending last week 8 percent lower. A Chinese central bank official said the nation’s growth would be back on track soon as Beijing provides more financial support to households and companies, according to an interview with People’s Daily.
A bulk carrier ran aground in the Suez Canal and tugs are trying to refloat the ship, according to Leth Agencies, which provides services to vessels crossing the passage. Supply chains were rattled in 2021 after the giant container ship Ever Given got stuck in the key waterway.
“It will take some time before the impact of China’s reopening of borders can be felt,” said Sean Lim, an analyst at RHB Investment Bank Bhd in Kuala Lumpur. “Concerns over soft demand remain, but OPEC+ should still be a major price support. We expect a more balanced oil market in the medium term.”
The Federal Reserve may lean toward smaller interest-rate rises after wage growth cooled in December, another stepdown in its aggressive campaign of monetary tightening.
That’s put pressure on the US dollar and added to tailwinds for commodities priced in the currency.
Oil has had a weak start to 2023 as forward curves signal ample supply and thin liquidity leaves futures prone to wild swings. However, there’s a growing chorus of bullish voices, with top hedge fund manager Pierre Andurand saying crude could exceed US$140 a barrel this year if Asia fully re-opens after Covid-related lockdowns.
— Bloomberg
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