Oil recovered some of a drop of about 9% over the previous two sessions, with traders assessing the outlook for China’s demand and the impact of cold US weather on inventories.
(Bloomberg) — Oil recovered some of a drop of about 9% over the previous two sessions, with traders assessing the outlook for China’s demand and the impact of cold US weather on inventories.
West Texas Intermediate futures climbed near $74 a barrel, snapping the biggest two-day decline since March. A surge in Covid-19 cases across China is clouding the near-term demand outlook, overshadowing optimism that commodity consumption in the world’s top importer will eventually rebound.
Crude’s gloomy start to the year has come with futures curves continuing to signal a market that is oversupplied. Inventory figures later Thursday will give a first insight into the impact of pre-Christmas cold weather on US stockpiles, after the American Petroleum Institute reported a build on Wednesday.
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At the same time, the oil market is continuing to grapple with lower levels of participation, with open interest near multiyear lows, leaving prices susceptible to large intraday swings. Saudi Arabia cut its oil prices for Asia, an indication that demand in its main market remains sluggish.
“Conviction at the beginning of a new year always tends to be low for fear of catching the wrong move,” said Ole Hansen, head of commodities strategy at Saxo Bank. “I’m reading very little into the price action during the first couple of weeks.”
The industry-funded API reported US commercial crude stockpiles expanded by 3.3 million barrels last week, according to people familiar with the figures. Gasoline inventories also increased, but supplies of distillates — a category that includes diesel — shrank.
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