Oil steadied as traders weighed the prospects for tighter US monetary policy against optimism for a demand recovery in China and supply disruption in Europe.
(Bloomberg) —
Oil steadied as traders weighed the prospects for tighter US monetary policy against optimism for a demand recovery in China and supply disruption in Europe.
West Texas Intermediate held near $76 a barrel, after earlier dropping as much as 1%. Poland’s largest oil company, PKN Orlen SA, unexpectedly stopped receiving crude via the Druzhba pipeline from Russia. At the same time, traders remain anxious that strong US inflation will compel the Federal Reserve to keep raising rates, bolstering the dollar and impeding commodity demand.
“Hot inflation exacerbated worries that the Federal Reserve may have to keep rates higher,” said Stephen Brennock, an analyst at broker PVM Oil Associates Ltd. in London. Nonetheless, “the ingredients are there for tightening oil fundamentals and a gradual recovery in oil prices.”
Crude has traded within a tight $10 range so far this year as investors weigh a welter of conflicting forces, including the outlook for supplies from Russia, China’s reopening, and the trajectory of monetary policy.
The market’s prospects will come into focus over the coming days as traders congregate in London for International Energy Week, one of the industry’s marquee events. Vitol Group Chief Executive Officer Russel Hardy told Bloomberg TV that oil prices could return to triple digits later this year as consumption climbs and the market tightens.
“Demand is expected to hit record levels in the second half of the year,” Hardy said. “The prospect of higher prices in the second half of the year, in the sort of $90-$100 range, is a real possibility.”
While the European Union has banned shipments of Russian crude and petroleum products by sea, some pipeline flows have remained. Poland has repeatedly said it plans to end Russian oil imports entirely, and Orlen said consumers won’t be impacted by the halt, for which it said it had prepared.
With sanctions on Russia tightening, Europe imported large amounts of diesel in February by boosting shipments from Asia and the Middle East. The curbs on Russia haven’t really “bitten that hard” because China, India and Turkey haven’t joined in, former US Treasury Secretary Lawrence Summers said.
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