Oil edged higher as traders looked to a revival in Chinese demand this year after data showed the economy fared better than expected last quarter.
(Bloomberg) — Oil edged higher as traders looked to a revival in Chinese demand this year after data showed the economy fared better than expected last quarter.
The global benchmark Brent climbed as much as 2.7% to trade above $86 a barrel on Tuesday, before paring some gains alongside broader equity markets. The world’s largest crude importer economy grew more than anticipated in the fourth quarter as virus curbs swiftly ended.
“Over the near term, rising product exports and directionally improving consumer demand will continue to support strong Chinese refinery runs and crude imports,” RBC Capital Markets analyst Michael Tran wrote in a note to clients.
Read more: China faces bumpy economic recovery in Covid Zero aftermath
The rising sense of optimism sent a jolt of liquidity into markets with the number of oil futures contracts held by traders rose to the highest since June.
Much of Wall Street remains bullish on oil, with Goldman Sachs Group Inc. reiterating its case for higher crude prices. Commodity markets are now pricing in a recession “that we don’t believe is going to materialize,” the bank said in a Jan. 16 note.
Crude has had a rocky start to 2023, sinking in the opening week on concerns over a global slowdown, before rebounding. Aside from China, oil has found support from a weakening dollar and growing expectations that the Federal Reserve is nearing an end to its aggressive series of interest-rate hikes. Meanwhile, Saudi Arabia floated the idea of trading crude in currencies other than the US dollar.
Later Tuesday, the Organization of Petroleum Exporting Countries is scheduled to release its monthly analysis of the global market. OPEC Secretary-General Haitham Al-Ghais said in a Bloomberg TV interview that he’s “cautiously optimistic” about the global economy.
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