Oil advanced as investors assessed more evidence of higher energy demand in China and broader markets gained with a risk-on tone.
(Bloomberg) — Oil advanced as investors assessed more evidence of higher energy demand in China and broader markets gained with a risk-on tone.
West Texas Intermediate rose above $79 a barrel after losing almost 2% over the previous two sessions as data showed US inventories swelled by more than 16 million barrels. Passenger loads at China’s top three airlines are rebounding as travel picks up again, adding to signs of increased mobility and energy consumption after refiners stepped up crude purchases and raised run rates.
The pick-up in crude came as stocks in Asia rose alongside US share futures, adding fuel to a global equity rally that appeared to shrug off the prospect of higher US interest rates. A gauge of the dollar eased, aiding raw materials.
Oil remains slightly lower year-to-date as investors weigh a US plan to sell more oil from the Strategic Petroleum Reserve, and Russian output cuts planned for March. Against that mixed backdrop, the International Energy Agency and the Organization of Petroleum Exporting Countries both issued more positive forecasts for the global market this week, with the IEA raising its consumption estimate for the first quarter as China reopens.
“All eyes are now on China’s comeback,” said Will Sungchil Yun, senior commodities analyst at SI Securities Corp. “Prices are likely to stay volatile in the next few weeks in the run-up to the National People’s Congress.”
China is holding its annual session of the National People’s Congress from March 5, at which fresh stimulus measures may be unveiled to bolster growth.
Global benchmark Brent’s prompt spread is in backwardation, a bullish pattern marked by front-month futures trading above the next contract. The gap was 37 cents a barrel in backwardation, compared with 20 cents a barrel in contango, the opposite structure, about a month ago.
“Road traffic congestion is rising in Asia, particularly in China. Flight numbers are back to pre-pandemic levels,” Australia & New Zealand Banking Group said in a note. While Russia’s oil production and exports are holding up better than expected, the export ban on oil products is triggering supply cuts, it said.
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