Oil extended its recent gain amid optimism over a revival in Chinese demand, even as concerns linger about inflation in the US and Europe.
(Bloomberg) — Oil extended its recent gain amid optimism over a revival in Chinese demand, even as concerns linger about inflation in the US and Europe.
West Texas Intermediate rose above $78 a barrel, after adding 2.7% over the previous two sessions. China’s economy is showing signs of a stronger rebound after abandoning its Covid Zero policy, and some oil-market participants see signs of bullishness.
Chevron Corp. Chief Executive Officer Mike Wirth on Wednesday said rising Chinese demand may aid prices, particularly in the second half of the year. Amin Nasser, Wirth’s counterpart at Saudi Aramco, said consumption in the world’s biggest oil importer is “very strong.”
Oil has seen a rocky start to the year due to several competing factors. US crude oil stockpiles have climbed every week since late December, to the highest level since May 2021. And while the outlook for China is positive, the Federal Reserve has signaled it will need to push interest rates higher to rein in inflation.
There’s also concern about inflation in Europe, after data from France, Spain and Germany came in hotter than expected this week.
“Although I still maintain that the second half of the year is going to be tighter, there is no imminent protracted rally in prices due to persistent inflationary pressures,” said Tamas Varga, an analyst at PVM Oil Associates Ltd.
Still, widely-watched time spreads are signaling growing strength in the oil market. The prompt spread for global benchmark Brent — the gap between the two nearest contracts — is at its widest since late November.
Russian oil flows also remain in focus after Moscow said it would cut crude production this month in retaliation for sanctions and price caps on its oil exports. The Kremlin said it would be pragmatic when deciding on future output, and that its actions would depend on market developments.
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