Oil prices on track for weekly gains despite concerns over rising US crude stocks

March 03, 2023 (MLN): Oil prices were mixed in early trade on Friday, with Brent crude futures down 0.5% to $84.36 a barrel and U.S. West Texas Intermediate (WTI) crude futures down 0.5% at $77.75 a barrel.

However, despite the early decline, both Brent and WTI were on track to post gains of nearly 2% for the week, buoyed by a rebound in China's factory activity, as Reuters reported.

Manufacturing activity in China grew last month at the fastest pace in more than a decade, reinforcing expectations of a fuel demand recovery. This has led to hopes of strong growth in fuel demand in China, the world's top oil importer, which in turn has supported oil prices.

Seaborne imports of Russian oil are set to hit a record high this month, further boosting sentiment in the oil market. Meanwhile, comments by Atlanta Federal Reserve President Raphael Bostic that the Fed should stick with a "steady" quarter-point rate eased concerns in the U.S., helping to support oil prices on Thursday even after strong unemployment data.

However, the market remains wary of a faster-than-expected rise in consumer prices in France, Spain, and Germany, which boosted expectations of further interest rate increases by the European Central Bank (ECB).

Eurozone inflation rose to a higher-than-expected annual rate of 8.5% in February, according to a first estimate from the EU's statistics agency. This has raised concerns about potential rate hikes in Europe, which could negatively impact oil prices.

Furthermore, a 10th consecutive week of crude stock builds in the United States has weighed on the market this week. This indicates a continued oversupply of oil in the market, which could put pressure on prices in the coming weeks.

Overall, while the oil market has seen some positive developments this week, including strong factory activity in China, concerns about rising inflation and oversupply of crude in the U.S. have limited gains.

The market will continue to monitor these factors in the coming weeks to determine the direction of oil prices.

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