Oil prices were in a stable mood on Thursday for a larger-than-expected drop in US crude stockpiles and Chinese demand competing with concerns that more aggressive US interest rate hikes will slow economic growth and reduce oil consumption.
Brent, WTI is calm after two days of losses. Brent crude futures were up 2 cents to $82.68 a barrel at GMT 0400, while West Texas Intermediate (WTI) crude futures were down 1 cent to $76.65 a barrel.
Oil prices have recently been under the influence of the US Federal Reserve’s hawkish stance and the increased probability of a 50 basis point increase instead of 25 basis points.
Oil futures fell more than 3% on Tuesday, posting their biggest daily drop since early January after comments from Powell that he will likely need to raise rates more than expected in response to the latest strong data.
The oil market will be battling interest rate hikes and inflation targets on the one hand, while on the other, seeking the backing of hopes for China’s reopening, at least in the first half of the year.
While China’s crude oil imports fell 1.3% in the first two months of 2023 from a year ago, analysts pointed to accelerated imports in February as a sign of fuel demand picking up after Beijing lifted COVID-19 controls.
On Tuesday, the secretary general of the Organization of the Petroleum Exporting Countries said that China’s oil demand will increase by 500,000 to 600,000 barrels per day in 2023, adding that the organization is “pretty optimistic and cautious”.
Meanwhile, data from the U.S. Energy Information Administration (EIA) on Wednesday showed U.S. crude inventories fell 1.7 million barrels last week, failing analysts’ expectations for a 395,000-barrel increase, ending a 10-week stockpile increase streak.
However, adding to demand concerns, US gasoline inventories fell by 1.1 million barrels. Official data showed it fell short of analysts forecast of 1.9 million barrels, and distillate inventory increased by 138,000 barrels, compared with expectations for a 1 million barrel decline.
Until we see clear signs that the demand recovery in China is gaining momentum, oil prices are likely to remain calm.