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Oil edged higher — after the longest run of losses this year — as the dollar fell and traders took stock of a mixed demand outlook dominated by tightening US monetary policy and China’s reopening.
West Texas Intermediate rose above US$74 a barrel after slumping around 3 percent on Wednesday following Federal Reserve minutes that showed further interest-rate hikes are expected to combat inflation. That overshadowed more evidence of a robust rebound in China’s demand after it scrapped Covid Zero curbs last year. A weaker dollar makes crude cheaper for most buyers.
“The salvation for the oil market is the recovery in China, but that will take time to take hold,” said John Driscoll, director of JTD Energy Ltd. in Singapore. Hawkish signs from the Fed add to bearish signals and pessimism is going to weigh on markets for a while, he added.
Wall Street banks are starting to temper their bullish outlook for oil prices, with Morgan Stanley the latest to trim its forecasts. The market has endured a bumpy ride since the start of the year, and WTI futures have traded in a range of around US$10 a barrel as China’s bullish outlook competes with a hawkish Fed.
In the Brent market, the prompt timespread narrowed sharply on Wednesday. That’s a tentative sign of a softer market, though traders often pare back positions ahead of the contract expiry, due next week. The nearest spread for WTI is in contango, a structure that signals ample supply.
The American Petroleum Institute reported US crude inventories rose by 9,9 million barrels last week, according to people familiar with the data. Stockpiles are at the highest level since June 2021 and official weekly figures from the Energy Information Administration are due later Thursday.– Bloomberg
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