Oil steadied as traders looked to a revival in Chinese demand this year after data showed that the economy fared better than expected last quarter, with further clues on the outlook to come in an OPEC analysis.
(Bloomberg) — Oil steadied as traders looked to a revival in Chinese demand this year after data showed that the economy fared better than expected last quarter, with further clues on the outlook to come in an OPEC analysis.
Global benchmark Brent held above $84 a barrel after shedding 1% on Monday. China’s economy grew by a larger-than-expected amount in the fourth quarter as virus curbs swiftly ended, data from Beijing showed. That looks set to bolster traders’ expectations for higher energy consumption this year.
Read more: China Faces Bumpy Economic Recovery in Covid Zero Aftermath
Ahead of the data, Goldman Sachs Group Inc. reiterated its case for higher crude prices, arguing that Western economies would avoid recession, aiding consumption, just as Chinese demand improves and Russian supply drops. Commodity markets are now pricing in a recession “that we don’t believe is going to materialize,” the bank said in a note dated Jan. 16.
Crude has had a rocky start to 2023, sinking in the opening week on concerns over a global slowdown before rebounding. Aside from China, oil has found support from growing expectations that the Federal Reserve is nearing an end to its aggressive series of interest-rate hikes and a weakening dollar.
The “better-than-expected data from China might support prices as the focus is currently on Chinese demand,” said Ravindra Rao, head of commodities research at Kotak Securities Ltd. in Mumbai, citing the end of virus curbs.
Later Tuesday, the Organization of Petroleum Exporting Countries is scheduled to release its monthly analysis of the global market. Late last year, the wider 23-nation OPEC+ group agreed to collectively reduce supplies by 2 million barrels a day from November, and then hold steady into 2023.
The potential impact of China’s reemergence has been a key theme in recent outlooks. Among them, ING Groep NV said this month that Brent could average more than $100 a barrel this year as the country dismantles Covid curbs, while hedge fund manager Pierre Andurand said oil may top $140 in 2023.
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