Oil prices rose on Wednesday in hopes of a recovery in fuel demand as China continues to ease COVID-19 restrictions, but gains were limited as recession concerns and restarts at some US power plants shut down due to winter storms.
Brent futures for February delivery were up 9 cents, or 0.1%, to $84.42 a barrel as of 0406 GMT. WTI crude rose 10 cents, or 0.1%, to $79.63 a barrel. In the upbeat market, both benchmarks hit three-week highs on Tuesday.
Hopes for an increase in fuel demand in China, the largest importer of crude oil, are emerging as the world’s second-largest economy moves towards reopening its borders next month after three years of strict restrictions to curb the spread of COVID.
Chinese hospitals have also been under intense pressure from the rise in COVID-19 infections as the country moves towards treating the virus endemic. The latest COVID-19 policy relaxation in China will have a positive short-term impact, particularly on international aviation.
But we will have to wait another two months for China’s demand to fully normalize.
Prices also rose on news that, according to a decree from President Vladimir Putin, Russia aims to ban oil sales from February 1 to countries that apply the G7 price cap implemented on December 5th.
Although Russia’s ban on oil sales will reduce supply, this will be offset by reduced demand due to a possible global economic recession next year.
US oil refineries are restoring lost production. Oil refineries are working to resume operations at facilities that were shut down due to the freezing cold. This will be a recovery period that will extend into January for some facilities.
Output has been disrupted by an Arctic blast which dropped temperatures well below freezing, cutting oil and gas production from North Dakota and Texas.
U.S. crude inventories are estimated to have dropped by 1.6 million barrels last week, according to a survey, and distillate stockpiles are also falling.
Industry group American Petroleum Institute (API) will release data on US crude oil inventories at 2130 GMT. The Energy Information Administration (EIA), the statistical arm of the US Department of Energy, will release its own figures at 1530 GMT on Thursday.
