Oil rose as the US started seeking crude to refill its strategic reserves, but concerns are mounting over China’s economic recovery.
(Bloomberg) — Oil rose as the US started seeking crude to refill its strategic reserves, but concerns are mounting over China’s economic recovery.
West Texas Intermediate edged toward $72 a barrel after closing 1.5% higher on Monday. The US solicited bids for as much as 3 million barrels of sour crude for its Strategic Petroleum Reserve, with deliveries planned for August and awards to be announced in June, the Energy Department said.
China’s consumer spending and industrial activity grew at a slower pace than expected in April, adding to signs that the rebound post-Covid Zero is losing momentum. Crude processing held near a record, however.
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The SPR purchase, while relatively small, indicates the US seems serious about refilling the reserve after doubts in recent months, said Warren Patterson, head of commodities strategy for ING Groep NV. China’s industrial production was disappointing, but the oil numbers were “quite constructive”.
Oil is 11% lower this year as China’s lackluster recovery and a potential US recession weigh on the demand outlook. Ongoing talks on the US debt limit are also unnerving markets, with Treasury Secretary Janet Yellen saying the nation is already paying a price for not yet increasing the ceiling.
A resurgence of wildfires in Alberta prompted drillers to suspend some output, as officials warned of worsening conditions ahead. In 2016, blazes tore through the Canadian province and shut more than 1 million barrels of production.
The International Energy Agency is scheduled to release its monthly report later Tuesday, providing the market with a snapshot on the demand and supply outlook. Industry data on US inventories is also expected.
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