Oil prices stopped falling
2023.01.05 00:15
Oil prices stopped falling
Budrigannews.com – After two sessions of steep losses, investors returned to buy dips on Thursday, which helped oil prices rebound despite economic concerns stifling recovery.
By 0400 GMT, futures had increased by 75 cents, or 1.0 percent, to $78.59 a barrel, and U.S. West Texas Intermediate crude futures had increased by 77 cents, or 1.1 percent, to $73.61 a barrel.
Concerns about a possible global recession were the driving force behind the significant declines that occurred over the previous two days, particularly in light of the shaky short-term economic indicators in China and the United States, which are the world’s two largest oil consumers.
According to Jun Rong Yeap, a market strategist at IG, “Coming after the heavy sell-off since the start of the week, it seems that oil prices are attempting to tap on some weakness in the U.S. dollar this morning for some reprieve.”
He went on to say that, “The second month of contraction in US manufacturing PMI continues to reflect ongoing slowdown in economic activities, which may leave buyers shunning” the market.
According to data from Refinitiv Eikon, Brent and WTI’s combined declines of more than 9% on Tuesday and Wednesday were the largest two-day losses at the beginning of a year since 1991.
The benchmark oil contracts slipped back into contango in Asia trade on Thursday, indicating near-term bearishness. This meant that spot prices were lower than those for delivery months later. As manufacturing in the United States continued to contract in December, prices were impacted by US economic data. In November, the manufacturing ISM purchasing managers’ index (PMI) fell to 48.4 from 49.0 for the second consecutive month. According to the Institute for Supply Management (ISM), it was the weakest reading since May 2020.
At the same time, a survey conducted by the U.S. Labor Department revealed that the number of job openings had decreased less than anticipated, raising concerns that the Federal Reserve would use the tight labor market as an excuse to maintain interest rates at current levels for a longer period of time.
The pessimism regarding crude prices has been exacerbated by fears of economic disruption as COVID-19 travels through China, the largest oil importer in the world.
In anticipation of low domestic demand, the Chinese government increased export quotas for refined oil products in the first batch for 2023.
Meanwhile, oil prices were supported by a weaker dollar because demand typically rises when commodities denominated in dollars become less expensive for holders of other currencies.
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