Oil staged a partial rebound after slumping on Wednesday as the US dollar fell and traders weighed the potential for better demand in China.
(Bloomberg) — Oil staged a partial rebound after slumping on Wednesday as the US dollar fell and traders weighed the potential for better demand in China.
West Texas Intermediate rose toward $77 a barrel after losing 3.1% in the previous session following another build in US stockpiles. The drop came as the Federal Reserve raised interest rates, but also signaled that it’s made progress in its battle against inflation. The US dollar fell to the lowest since April, making commodities priced in the currency cheaper for many buyers.
Crude has been buffeted in recent sessions as US slowdown concerns vied with optimism that China’s ending of its Covid Zero policy will rekindle demand in the biggest crude importer. At the same time, traders are counting down to the next round of sanctions and price caps that will be imposed by the European Union and Group of Seven on Russian exports amid the war in Ukraine.
“Prices are finding support from a weakening US dollar,” said Ravindra Rao, head of commodities research at Kotak Securities Ltd. in Mumbai. However, “with all the bearish factors it seems difficult for oil to stay higher,” he said, citing expanding inventories, interest rate hikes, and slowdown concerns.
An OPEC+ committee, meanwhile, recommended keeping crude production steady as the market awaits clarity on demand in China and supplies from Russia. The group will hold output at levels set late last year, when it announced a cutback of 2 million barrels a day to balance markets.
Time spreads point to underlying strength, with the prompt spread for global benchmark Brent — the gap between the two nearest contracts — in a bullish backwardation structure. The difference was 26 cents a barrel, after spending most of the previous two months in the opposite contango pattern.
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