Oil prices steadied after four consecutive weeks of losses as the market balanced concerns over the US economy and China’s muted recovery against expectations of a rise in future demand.
(Bloomberg) — Oil prices steadied after four consecutive weeks of losses as the market balanced concerns over the US economy and China’s muted recovery against expectations of a rise in future demand.
West Texas Intermediate futures traded around $70 a barrel, with most markets trading in the expectation of a breakthrough in the US debt ceiling standoff. Oil is down about 12% this year as fears over a possible US recession outweigh supply cuts pledged by OPEC+. Spreads for US crude are largely flat.
Demand for physical barrels appears weak, while refinery margins — the profits that refiners make from processing crude into petroleum products like diesel and gasoline — remain low but are recovering.
Still, transportation data from China is starting to show increased car usage, while air travel from the country is in a protracted rebound.
“I still expect healthy growth in global demand driven by Asia’s aviation and industrial sectors, particularly from China,” said Daniela Corsini, senior economist at Intesa Sanpaolo SpA, who also pointed to low US distillate stocks as a signal more oil processing could be needed shortly.
Hedge funds and money managers have amassed the largest short position in global benchmark Brent since July 2021, although speculators are less bearish on US crude. Investors will be watching key economic data from China this week for clues on the pace of the nation’s recovery, as well as a monthly report from the International Energy Agency due Tuesday.
“Sentiment in the oil market remains negative with an uncertain demand outlook and concerns over the US debt ceiling,” said Warren Patterson, head of commodities strategy for ING Groep NV. “The market will likely be looking out for any potential demand revisions in the IEA’s monthly market report.”
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