Oil rose as traders took stock of China’s efforts to accelerate its economy and glimmers of strengthening demand from Asian buyers.
(Bloomberg) — Oil rose as traders took stock of China’s efforts to accelerate its economy and glimmers of strengthening demand from Asian buyers.
Prices reversed early losses and stayed higher after China’s Vice Premier was reported to have said that the economy is in good shape. Brent futures subsequently ticked above their 50-day moving average for the first time since late April, providing fresh support to prices.
“WTI crude prices are finally stabilizing above the $70 level as energy traders anticipate the start of summer should keep demand steady over the next few months,” said Ed Moya, senior market analyst at Oanda Corporation.
In physical markets, Middle Eastern oil prices have risen amid a flurry of buying from refiners in China and Japan. Alongside busy activity in a key trading window, spot differentials for some grades have doubled over the last week, an unusually large move over that time period.
Read More: Fed’s Powell Says Higher Interest Rates Needed to Curb Inflation
Oil has dropped in the first half of this year as China’s reemergence from its strict Covid Zero policies has failed to gain traction and global crude supplies, including from Russia, remain abundant. In response, the Organization of Petroleum Exporting Countries and its allies announced supply cuts to try and tighten the market.
“I think going forward, we’re seeing the market continue to tighten and inventories continue to drawdown,” shale producer EOG Resources Inc’s COO Billy Helms said at a conference Wednesday.
“Last year, you have to keep in mind the inventories rose largely on the back of the SPR releases and so without that the inventory will be a lot shorter than we are today.”
Meanwhile, in prepared remarks Wednesday Fed Chair Jerome Powell stressed the bank’s determination to curb inflation and suggested that further interest rate hikes are likely.
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