Oil reversed direction after nearly touching this month’s high as risk-off sentiment on Wall Street overtook positive demand signals coming from China.
(Bloomberg) — Oil reversed direction after nearly touching this month’s high as risk-off sentiment on Wall Street overtook positive demand signals coming from China.
West Texas Intermediate erased gains on the day after rising as much as 1.8%. The sharp drop coincided with a downturn in broader equity markets and a surge in the dollar, which typically makes risky assets less attractive. Even with the morning losses, the US benchmark continued to hold near $80, with traders confident in a strong outlook for demand.
Chinese officials said that domestic tourism is close to 90% of pre-pandemic levels, while analysts at JP Morgan Chase & Co said in a note Friday that a spate of refinery outages and the upcoming ban on Russian oil products will tighten global fuel supplies. The profit margin for turning oil into products like diesel is soaring and supportive of further crude demand, bank analysts said.
Crude has recovered from a steep slump at the start of the year and liquidity is returning to the futures market. Much of the optimism is from China, the biggest importer, with positive data related to tourism and demand from the Lunar New Year holiday. Investors are monitoring the impact of European Union sanctions on Russia’s seaborne shipments of petroleum products early next month, which some warn could be more disruptive than past actions.
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–With assistance from Julia Fanzeres.
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