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Oil edged higher as investors bet on stronger Chinese demand and as a weaker dollar made commodities more attractive for many buyers.
West Texas Intermediate rose toward $81 a barrel after ending little changed on Wednesday as US earnings rolled in. The number of virus-related deaths and severe cases at hospitals in China is now 70% lower than peak levels in early January, authorities said late on Wednesday. That should set the stage for a recovery in mobility and fuel consumption in the biggest oil importer.
Crude also benefited from drop in the US currency, with a gauge of the dollar slumping to a nine-month low on Wednesday. The retreat — which makes raw materials cheaper for overseas buyers — has been driven by expectations that a pause in the Federal Reserve’s rate-hike cycle may be on the horizon.
Crude’s latest leg higher follows a steep drop in the year’s first two sessions on concerns over a global slowdown. The rebound has rested largely on hopes that Chinese consumption will pick up following years of lockdowns. Liquidity is also returning to the crude futures market, with open interest in global benchmark Brent rebounding to the highest level since February last year.
“A weaker dollar and sustained, positive signals from China reopening underpinned” crude prices, said Charu Chanana, market strategist for Saxo Capital Markets Pte in Singapore.
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In less than two weeks, a European Union ban on seaborne imports of Russian oil products will start at the same time as a Group of Seven-led price cap on the fuels. Russia has been transferring record amounts of its flagship Urals crude at sea as Moscow tries to overcome freight costs that soared following European sanctions on its crude flows amid the war in Ukraine.
US commercial crude inventories expanded by about half a million barrels last week, data from the Energy Information Administration showed. While that increase was less than analysts had expected, it followed a build of more than 27 million barrels over the prior two weeks.
© 2023 Bloomberg
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