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Wednesday, May 22, 2024

Oil rises on strong crude demand, easing recession fears

Oil prices rose on Thursday, extending a rally of nearly 3% in the previous session, as optimism over record U.S. crude exports and signs that recession fears are abating outweighed concern over slack demand in China.

Oil prices increased on Thursday, extending a more than 3% recovery from the previous day, supported by news of US oil shipments and a weaker US dollar. However, gains in Asia were restrained due to ongoing concerns about sluggish demand in China.

Brent crude futures were up 20 cents, or 0.2%, to $95.89 per barrel. The price of a barrel of US West Texas Intermediate (WTI) crude increased by 19 cents, or 0.2%, to $88.10.

According to weekly government data released on Wednesday, US petroleum stocks increased by 2.6 million barrels last week, while daily crude exports reached a record-high 5.1 million barrels.

“Solid US crude exports raised optimism over demand and prompted fresh buys, but concerns that China’s muddled economic policies may continue under President Xi Jinping’s growing power limited gains in Asia,” stated Hiroyuki Kikukawa, common supervisor of analysis at Nissan Securities.

Read More: China’s rising fuel demand raises oil prices

Early this week, foreign investors sold off their Chinese assets out of concern that, under China’s strongest leader since Mao Zedong, ideology may increasingly trump development.

After a 60% increase this year due to Russia’s invasion of Ukraine, the World Bank said on Wednesday that it anticipates energy costs to decline by 11% in 2023. However, weaker global growth and Covid limits in China could cause a deeper decline. “A special operation,” according to Moscow, is what it is doing in Ukraine.

The dollar’s weakness also helped, as it has recently been a significant problem impeding the favourable parts of the oil market. The US Federal Reserve’s aggressive attitude on interest rate hikes is expected to be moderated, according to market estimates, which led to a decline in the value of the dollar on Thursday.

For different foreign currency holders, a depreciated dollar makes crude priced in dollars more affordable.

Despite a warning from the World Bank that any proposal will need the active participation of emerging market economies to be effective, US and Western officials are putting the finishing touches on plans to impose a ceiling on Russian oil prices.

Officials said that no price range had been established, but a person familiar with the process claimed that the cap would be set at the historical average of $63-64 per barrel, which would provide a natural upper limit.