On Thursday, oil prices rose more than 1% on anticipation that global demand will increase as China, the world’s largest oil importer, reopens its economy and favorable US economic data.
Brent futures had risen $1.18, or 1.4%, to $87.30 a barrel, while US West Texas Intermediate (WTI) crude had risen $1.12, or 1.4%, to $81. ,27. WTI was on track to close at its highest level since November 16 earlier in the day. But as of now, Brent and WTI were expected to close at their highest levels since January 23.
According to analysts at energy consultancy Ritterbusch and Associates, WTI is getting some support from the selloff in NYMEX (New York Mercantile Exchange) crack spreads.
This week US crack spreads, a proxy for refining profit margins, rose to their highest levels for gasoline and 3:2:1 since August.
The US economy expanded faster than expected in the fourth quarter due to strong consumer spending habits. Even so, momentum had slowed sharply by the end of the year as rising interest rates weakened demand.
The Energy Information Administration (EIA) reported that US crude inventories rose by 533,000 barrels to 448.5 million barrels in the week ending January 20.
Although the EIA reports that oil reserves are at their highest level since June 2021, they fell short of predictions of a 1 million barrel rise. The impending OPEC+ JMMC conference and the EU embargo on refined products are two other events that market participants are closely watching.
Oil reopening in China fuels demand optimism
This month, China began to relax tough COVID-19 regulations and Beijing reopened its borders for the first time in three years. If China, the main source of global commodity demand, resumes business as usual, markets will tighten significantly and conditions will be ideal for commodity investor inflows.
According to OPEC+ sources, the February 1 ministerial panel meeting will likely approve the group of oil producers’ existing production levels. According to a Reuters poll of analysts, global economic growth this year should barely exceed 2%. This will increase the possibility of further deterioration which runs counter to the general market optimism that had been around since the start of the year.
