Oil is growing but growth is limited
2023.01.12 02:52
Oil is growing but growth is limited
By Tiffany Smith
Budrigannews.com – As China’s demand outlook improved, oil prices increased on Thursday, building on gains from the previous session. However, gains were limited ahead of upcoming US inflation data.
by 0442 GMT, had increased by 16 cents, or 0.2 percent, to $82.83 per barrel, and U.S. West Texas Intermediate crude had also increased by 13 cents, or 0.2 percent, to $77.54 per barrel.
Hopes for an improved global economic outlook and concern over the impact of sanctions on Russian crude output pushed both benchmarks up 3% in the session on Wednesday. According to Tina Teng, an analyst at CMC Markets, “China is speeding up stockpiles for ahead of the Lunar New Year holiday, as the demand outlook has been improved amid a U-turn in its COVID policy.”
After the end of strict COVID-19 restrictions, China, a major oil importer, is reopening its economy, raising hopes that fuel demand will rise in 2023.
Despite COVID-19 curbs disrupting production and logistics, the Ministry of Industry and Information Technology predicted that the country’s industrial output would have increased by 3.6% in 2022 over the previous year.
Serena Huang, head of APAC analysis at Vortexa, stated, “There is continued optimism in the oil market fuelled by China’s re-opening, and as Chinese New Year approaches, increased travels should support gasoline and jet fuel demand.”
Travel data firm ForwardKeys reported on Thursday that, despite a 192% increase from the same time last year, China’s outbound flight bookings were only 15% of their pre-pandemic levels in the week following the country’s announcement that it would reopen its borders.
However, CMC Market’s Teng added that the upcoming inflation data from the United States is a major risk factor for oil. As a result, traders are becoming more cautious ahead of Thursday’s data release.
In December, core U.S. consumer prices are expected to rise at an annual rate of 5.7%, down from 6% a month earlier. The headline inflation rate is expected to remain at zero over the course of the month.
The market is also anticipating additional restrictions on Russian fuel product sales that will take effect in February as the European Union (EU) continues to work on additional sanctions against Moscow in response to the invasion of Ukraine.
According to the U.S. Energy Information Administration, the EU ban on Russia’s seaborne imports of petroleum products on February 5 may be more disruptive than the EU ban on Russia’s seaborne imports of crude oil in December.
On December 5, sales of Russian crude were subject to an international price cap.
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