Oil moved higher as optimism over China’s demand outlook offset the expectation of a large build in US crude stockpiles.
(Bloomberg) — Oil moved higher as optimism over China’s demand outlook offset the expectation of a large build in US crude stockpiles.
West Texas Intermediate erased earlier losses to rise as much as 2.7%. Chinese companies have been snapping up cargoes of US crude before Lunar New Year holidays. Earlier this week, the government issued a bumper batch of import quotas, spurring hopes of improved crude consumption.
US inventory data is due later that will continue to highlight the impact of a deep freeze late last year. Crude inventories jumped by 14.9 million barrels last week, the American Petroleum Institute reported. If confirmed by government figures later Wednesday, it would be the largest increase since February 2021.
“The perceived demand pull that’s expected from China is superseding the rise in crude inventories from the API,” said Dennis Kissler, senior vice president at Bok Financial Securities.
Oil has had a rocky start to 2023, slumping almost 10% in the first two sessions of the year on global recession concerns, before subsequently trending higher. Investors are keenly watching for clues on the outlook for US monetary policy, with JPMorgan Chase & Co.’s Chief Executive Officer Jamie Dimon saying rates may have to move higher than 5%.
Near-term time spreads are holding in a bearish contango structure, signaling ample supply. US benchmark’s prompt spread — the gap between the nearest two contracts — widened to 25 cents after having started at 19 cents at the beginning of the year.
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