March 01, 2023 (MLN): Oil prices rebounded on Wednesday as better-than-expected industrial data from China, the world's largest oil-importing country, lifted market sentiment. However, looming demand issues, including a build in US crude oil inventories and growing fears of further US interest rate hikes, continued to weigh on prices.
International benchmark Brent crude traded at $84.08 per barrel at 10.09 a.m. local time (0709 GMT), up 0.75% from the closing price of $83.45 a barrel in the previous trading session. At the same time, American benchmark West Texas Intermediate (WTI) traded at $77.67 per barrel, a 0.80% increase after the previous session closed at $77.05 a barrel.
The boost in market sentiment came after China's National Bureau of Statistics released much-anticipated data on Tuesday, revealing that Chinese industry activity increased significantly in February. The official manufacturing purchasing managers' index increased to 52.6, signaling further expansion in the world’s second-largest, oil-consuming country. This was the highest reading since April 2012, when it reached 53.5.
The positive data from China encouraged crude oil purchases and helped lift market sentiment, which had been dampened by concerns about a potential slowdown in demand due to the spread of the Omicron variant of the coronavirus.
However, the rebounding demand and oil prices faced pressure from the American Petroleum Institute (API) announcement on Tuesday evening. The API estimated a rise of nearly 6.5 million barrels in US crude oil inventories, relative to the market expectation of a 440,000-barrel increase. This unexpected rise in inventory levels raised concerns about oversupply and pushed prices down.
The US Energy Information Administration's (EIA) data on oil stocks was announced later on Wednesday, and it confirmed the API's estimate of a rise in crude oil inventories. The EIA reported an increase of 5.8 million barrels in crude oil inventories for the week ending February 25, which was above the expected increase of 440,000 barrels. This further weighed on oil prices and put downward pressure on the market.
In addition to the inventory increase, growing fears of further US interest rate hikes also weighed on oil prices. The US Federal Reserve is expected to continue raising interest rates to combat inflation, which could dampen economic growth and weaken demand for oil.
Overall, while positive data from China initially lifted market sentiment, looming demand issues and oversupply concerns weighed on oil prices. The market will continue to monitor the impact of the Omicron variant on demand, as well as the US Federal Reserve's actions on interest rates, to assess the future direction of oil prices.
Copyright Mettis Link News
Posted on: 2023-03-01T14:45:15+05:00
