Oil edged higher as investors weighed the extent of China’s demand recovery and the likelihood of OPEC+ keeping output unchanged.
West Texas Intermediate rose toward $81 a barrel after declining by almost 2% on Tuesday as mixed earnings and weaker business activity spurred concerns about a US slowdown. China’s ditching of Covid Zero has boosted expectations that energy demand will eventually pick up in the largest crude importer.
Delegates from the Organization of Petroleum Exporting Countries said that they expect an advisory committee of ministers to recommend keeping oil production at current levels when they meet next week.
Crude has rebounded since collapsing about 10% in the year’s first two sessions of the year on recessionary fears. The recovery has rested largely on hopes that Chinese consumption will pick up, although a weaker dollar has also aided commodities. Traders are also tracking Russian flows, with sanctions and price caps on petroleum products set to kick in next month as Europe and the US step up efforts to deprive Moscow of funds to fight its war in Ukraine.
“Oil prices are attempting to pare some losses” that followed the weak US purchasing managers index data on Tuesday, said Yeap Jun Rong, market strategist at IG Asia Pte in Singapore. “But much is still up in the air, with the muted risk environment not providing much conviction.”
At present, China is midway through a week-long break to mark the Lunar New Year, when people traditionally return to their hometowns. The volume of trips has picked up, but the wave of travel may bring increased risk of Covid-19 spreading. The nation’s financial markets will reopen next week.
The American Petroleum Institute reported US crude inventories rose 3.38 million barrels last week, according to people familiar with the figures. Government data — which showed commercial stockpiles swelled by more than 27 million barrels in the prior two weeks — are due later Wednesday.
Further insight into the market will come as supermajors report quarterly earnings in the coming days, starting with figures and commentary from Chevron Corp. on Friday. Amid a milder winter in Europe and lingering concerns over the economic outlook, there are expectations this set of results could be the last strong ones for the industry, marking a peak of the cycle.
© 2023 Bloomberg