Oil edged higher as tightening supplies took center stage, at least temporarily sidelining the concerns about the Chinese economy and US monetary policy that had spurred a three-day drop.
(Bloomberg) — Oil edged higher as tightening supplies took center stage, at least temporarily sidelining the concerns about the Chinese economy and US monetary policy that had spurred a three-day drop.
West Texas Intermediate traded near $80 a barrel after shedding 4.6% this week through Wednesday. Physical markets across the globe have shown signs of robust demand, US commercial oil inventories are at the lowest since January and top buyers in Asia have been on a crude-buying spree.
However, looming over the rebound are worries about top oil importer China’s post-pandemic recovery, with authorities said to have told state-owned banks to step up currency intervention. Liquidity remains thin, and volatility gauges are muted, reflecting low participation, market participants said.
“In the near-term, we don’t expect significant flows from trend followers, suggesting price action may remain broadly range-bound for the time being,” said Daniel Ghali, senior commodity strategist at TD Securities.
In the US, Federal Reserve officials remained concerned at their July policy meeting that inflation would fail to recede and that further interest rate hikes could be needed, according to minutes from the gathering. Higher borrowing costs may hurt energy demand, while supporting gains in the US dollar.
With prices slipping from multi-month highs in recent days, Citigroup Inc. urged investors to sell oil into the winter, given the likelihood of soft demand and ample supply.
“The oil market has been unable to escape broader market concerns following a raft of weaker-than-expected Chinese macro data this week,” said Warren Patterson, head of commodities strategy at ING Groep NV. “However, we remain constructive on oil, given the expectation that fundamentals will continue to tighten due to ongoing supply cuts from OPEC+.”
To get Bloomberg’s Energy Daily newsletter direct into your inbox, click here.
–With assistance from Yongchang Chin.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.