- There are worries about slowing American demand in the wake of record-high crude stocks.
- So far this week, oil has increased by more than 6%.
- US crude oil stocks went up last week to their highest level since June 2021.
On Thursday, oil prices found it difficult to gain traction as hopes for improving Chinese demand were countered by worries about slowing American economic growth in the wake of record-high crude stocks. So far this week, oil has increased by more than 6%.
According to experts at Haitong Futures, “US crude oil stocks have continued to exceed forecasts, which to some part erodes the bullish sentiments spurred on by China’s demand recovery optimism.”
The Energy Information Administration reported on Wednesday that higher production helped to push American crude oil stocks up last week to their highest level since June 2021. As demand remained poor, US gasoline and distillate stockpiles also increased last week.
Officials from the Federal Reserve indicated on Wednesday that additional interest rate increases are anticipated as the US central bank moves forward with its efforts to reduce inflation. However, none were prepared to say that January’s strong jobs report may prompt them to adopt a more aggressive policy stance.
At a Wall Street Journal event, New York Fed president John Williams said that raising the federal funds rate to a range between 5.00% and 5.25% “seems like a very reasonable view of what’s needed this year to get the supply and demand imbalances down.”
Williams added that the Fed would likely be able to take “smaller steps” this year compared to the pace of much of the initial tightening campaign.
However, as China, the world’s second-largest oil consumer halted its strict zero-COVID policy, which involved city-wide lockdowns and mass testing, in December, the anticipation of increased demand from China helped to support oil prices.
“In China, travel has significantly grown since the Lunar New Year festivities. This year, we anticipate an increase in Chinese oil consumption of about 1.0 million barrels per day, with robust growth beginning as early as the end of Q1, ” ANZ bank analysts Soni Kumari and Daniel Hynes penned in a note on Thursday.
“In general, this should increase global demand in 2023 by 2.1 million barrels per day.”
This optimism might see the oil bull rally continue after the short pause.