Oil gains 3% on global economic optimism, despite surprise U.S. crude build

  • China reopens after COVID restrictions, oil demand expected to rise
  • HSBC sees only one U.S. Fed interest rate hike
  • U.S. crude stocks jump in surprise build, biggest since February 2021
  • Russia sees no problems with oil exports despite sanctions

NEW YORK, Jan 11 (Reuters) – Oil prices rose 3% on Wednesday to a week-long high as hopes for an improving global economic outlook and worries about the impact of sanctions on the Russian crude production outweighed a surprise massive increase in US crude inventories. .

Brent crude futures rose $2.57, or 3.2%, to settle at $82.67 a barrel. U.S. West Texas Intermediate (WTI) crude rose $2.29, or 3.1%, to settle at $77.41.

Both benchmarks settled at their highest since Dec. 30, with WTI up for a fifth straight day for the first time since October and Brent up for a third straight day for the first time since December.

Global stocks rose on hopes that U.S. inflation and earnings numbers due Thursday will point to a resilient economy and translate into a slower pace of interest rate hikes.

If inflation is below expectations, it would drive the dollar lower, analysts say, which could boost oil demand as it makes crude cheaper for buyers holding other currencies.

The Federal Reserve will likely raise its target interest rate for the last time at its January 31-February 31 meeting. 1 monetary policy meeting, taking it 50 basis points (bps) to a range of 4.75% to 5.00%, HSBC said in a research note.

Much of the market’s optimism hinged on the reopening of its economy by major oil importer China after tight COVID-19 restrictions ended.

“Energy traders should get used to seeing oil prices go up. Oil demand is coming back and expectations are high that demand from China is about to spike,” said Edward Moya, senior analyst. market to data and analytics firm OANDA.

Overall passenger vehicle sales in China are expected to increase by 5% in 2023, Volkswagen AG Chinese President Ralf Brandstaetter told Chinese media.

China’s industrial output is expected to have risen 3.6% in 2022 from a year earlier, the Ministry of Industry and Information Technology (MIIT) said, despite production disruptions and logistics due to COVID-19 restrictions.

The U.S. Energy Information Administration (EIA) said crude inventories jumped 19.0 million barrels last week, the third-biggest weekly gain on record and the highest since inventories began rose by a record 21.6 million barrels in February 2021. Last week’s increase came as refiners were slow to restore production after a freeze in operations at the end of 2022.

Analysts polled by Reuters had forecast a drop of 2.2 million barrels in crude inventories and industry data from the American Petroleum Institute (API) showing an increase of 14.9 million barrels. ,

The EIA forecast this week that U.S. crude production will hit all-time highs in 2023 and 2024.

An international price cap imposed on sales of Russian crude came into effect on December 5 and further restrictions on product sales are expected to come into effect next month as the European Union (EU) continues to work on new new sanctions against Moscow following the invasion of Ukraine. .

The EIA said the upcoming EU ban on maritime imports of petroleum products from Russia on February 5 could be more disruptive than the EU ban on maritime imports of crude oil from Russia implemented in December 2022.

Russian Deputy Prime Minister Alexander Novak said the country’s oil producers had had no trouble striking export deals despite Western sanctions and price caps.

Additional reporting by Noah Browning in London, Sonali Paul in Melbourne, Trixie Yap in Singapore and Laila Kearney in New York; Editing by Marguerita Choy, David Goodman and David Gregorio

Our standards: The Thomson Reuters Trust Principles.

Scott Disavino

Thomson Reuters

Covers the North American electricity and natural gas markets.

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