As OPEC’s positive revision for China demand overshadowed the global investor mood caused by U.S. bank failures, oil prices rose more than 1% on Wednesday.
At 0710 GMT, Brent crude futures rose $1.04, or 1.3%, to $78.49. WTI futures rose 98 cents, or 1.4%, to $72.31. Benchmarks fell over 4% to a three-month low on Tuesday.
“The oil market has come back on its own following the recent steep losses,” said Fujitomi Securities Co Ltd analyst Toshitaka Tazawa, adding that some investors leveraged the decline to find bargains.
“The OPEC upgrade in Chinese oil demand outlook also gave support, however investors were still apprehensive over a cascading financial catastrophe after the recent failure of U.S. institutions,” he said, adding that whether WTI can continue above $70 a barrel is being watched.
On Tuesday, OPEC upped its 2023 Chinese oil demand prediction owing to the easing of COVID-19 limits, but it kept global demand unchanged due to global economic uncertainties.
On Wednesday, statistics indicated that China refineries processed 3.3% more crude in the first two months of 2023 than a year earlier, driven by gasoline export policy and independent refiners processing. Beijing’s easing of COVID limitations enhanced transport fuel margins.
Singapore-based 8VantEdge senior portfolio manager Stefano Grasso said China’s demand rebound is optimistic for oil prices.
“The belief is that the oil supply-demand balance would tighten in the second half, powered by China comeback, unless a serious global recession occurs,” he said.
After the Fed’s strong interest rate rose last year, Silicon Valley Bank (SIVB.O) and Signature Bank (SBNY.O) failed, raising concerns about other banks’ vulnerabilities.
That raised questions about whether the central bank might pause monetary tightening.
U.S. inflation statistics met forecasts on Tuesday, supporting a lower Fed rate rise next week.
According to market sources quoting American Petroleum Institute numbers on Tuesday, U.S. crude oil stocks climbed by 1.2 million barrels in the week ended March 10, in line with a Reuters poll. Fuel stockpiles declined.
On the supply side, Saudi Arabia’s energy minister Prince Abdulaziz bin Salman told Energy Intelligence on Tuesday that the OPEC+ coalition, which includes Russia, will maintain October output curbs through the end of the year.
The IEA will release its monthly report later Wednesday, while the EIA will provide weekly inventory data at 10:30 a.m. EDT. IEA/S
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