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Oil rises 1% in choppy trade on China demand hopes

February 6, 2023By Reuters

HOUSTON, Feb 6 (Reuters) – Oil prices edged higher in choppy trading on Monday as markets weighed a return in demand from China against supply concerns and fears of slower growth in major economies curbing consumption.

Brent futures for April delivery rose USD 1.05, or 1.3%, to USD 80.99 a barrel, after trading between USD 79.10 and USD 81.25.

West Texas Intermediate crude (WTI) gained 72 cents, or 1%, to USD 74.11 per barrel, after hitting a high of USD 74.41 and a low of USD 72.25.

Prices were buoyed by prospects for China’s recovery after the relaxation of COVID-19 restrictions.

The International Energy Agency (IEA) expects half of this year’s global oil demand growth to come from China, the agency’s chief said on Sunday, adding that jet fuel demand was surging.

Holding back gains however, Friday’s blowout US employment number raised expectations that the Federal Reserve’s rate hikes will not end with a hard economic landing, and that the US central bank may have more than one more rate increase left, which could curb economic growth and lower fuel demand.

The dollar also rose to a three-week high against the euro on Monday. A stronger dollar typically reduces demand for dollar-denominated oil from buyers paying with other currencies.

“You’ve got a strong dollar, you’re in a generally risk-off environment,” said Robert Yawger, executive director of energy futures at Mizuho.

WTI and Brent had slid 3% last Friday after the strong US jobs data.

Supply concerns continued to affect markets as operations at Turkey’s oil terminal in Ceyhan halted after a major earthquake hit the region.

The BTC terminal, which exports Azeri crude oil to international markets, will be closed on Feb. 6-8 while operators assess earthquake damage, a Turkish shipping agent said.

However, a preliminary Reuters poll showed that US crude oil stockpiles likely rose by about 2.2 million last week.

Also, price caps on Russian products took effect on Sunday, with Group of Seven nations, the European Union and Australia agreeing on limits of USD 100 a barrel on diesel and other products that trade at a premium to crude and USD 45 a barrel for products that trade at a discount, such as fuel oil.

(Reporting by Noah Browning; Additional reporting by Sonali Paul in Melbourne and Emily Chow in Singapore; Editing by Marguerita Choy, David Goodman and Kevin Liffey)


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