Oil rallied as Saudi Arabia signaled confidence in the demand outlook with a surprise boost in crude prices, while investors waited for comments on US monetary policy from Federal Reserve Chair Jerome Powell.
(Bloomberg) — Oil rallied as Saudi Arabia signaled confidence in the demand outlook with a surprise boost in crude prices, while investors waited for comments on US monetary policy from Federal Reserve Chair Jerome Powell.
West Texas Intermediate futures climbed above $75 a barrel after closing 1% higher on Monday. Saudi Aramco increased most of its prices for crude that will be shipped to its main market of Asia in March, amid growing optimism over a robust demand rebound in China following the end of Covid Zero.
Equity markets climbed ahead of a scheduled interview with Powell at the Economic Club of Washington later Tuesday. The dollar also eased, making commodities priced in the currency more attractive to investors.
Oil has endured a choppy start to the year, whipsawed by optimism around China’s reopening and fears over the prospect for a global economic slowdown. Investors are also assessing the potential fallout from fresh European Union sanctions on Russian refined products and how that will impact trade flows.
“The market has been a bit tentative about China’s return,” Vandana Hari, the founder of Vanda Insights in Singapore, said during a Bloomberg Television interview. “The main challenge for the market right now is at what pace the economy will come back and how smooth it will be.”
Supply outages added to bullish tailwinds for oil. Turkey halted flows to the Ceyhan export terminal after a major earthquake, while output at Norway’s giant Johan Sverdrup field was lower due to a power disruption.
Despite the outages, the Brent futures curve is still signaling tight near-term supply. The prompt spread — the difference between its two nearest contracts — was 33 cents a barrel in backwardation.
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–With assistance from Menaka Doshi.
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