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Oil rose for a second session after Saudi Arabia unexpectedly raised its crude prices to Asia, signalling confidence in the demand outlook.
West Texas Intermediate futures climbed toward US$75 a barrel after closing 1 percent higher on Monday.
Saudi Aramco increased most of its prices for crude that will be shipped to its main market of Asia in March, amid growing optimism over a robust demand rebound in China following the end of Covid Zero.
Supply outages also added to bullish tailwinds for oil. Turkey halted flows to the Ceyhan export terminal after a major earthquake, while output at Norway’s giant Johan Sverdrup field was lower due to a power disruption.
Oil has endured a choppy start to the year, whipsawed by optimism around China’s reopening and fears over the prospect for a global economic slowdown.
The market is also assessing the potential fallout from fresh European Union sanctions on Russian refined products and how that will impact trade flows.
“The market has been a bit tentative about China’s return,” Vandana Hari, the founder of Vanda Insights in Singapore, said during a Bloomberg Television interview. “The main challenge for the market right now is at what pace the economy will come back and how smooth it will be.”
The Brent futures curve is still signalling tight near-term supply, despite the outages in Turkey and Norway.
The prompt spread — the difference between its two nearest contracts — was 33 cents a barrel in backwardation.
Investors will be watching for commentary on the outlook for US monetary policy from Federal Reserve Chair Jerome Powell when he’s interviewed at the Economic Club of Washington later Tuesday.—Bloomberg
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