2023-06-15 22:40:20
Oil prices rose as stronger demand in China outweighed investor fears of another hike in interest rates in the United States.
West Texas Intermediate crude futures approached $71 a barrel in Thursday’s trading, its highest level in a week.
This week, China raised crude oil import quotas compared to the same period last year, and the economic stimulus package it is considering approving boosted the markets’ hopes for higher demand.
Although the pace of growth in China’s economy lagged behind the expectations of some market participants, it was enough to offset the impact of the US Federal Reserve’s warning that borrowing costs would increase at a higher-than-expected rate.
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“A little bit of good news from China might go a long way for oil prices given that they are the focal point of demand movement,” said Stacy Morris, head of energy research at VettaFi.
However, renewed recession fears are resurfacing in the futures price spreads. The spot spread in Brent has shifted to contango, and WTI’s incursion into the same region has widened to its most bearish level since February, with futures prices rising relative to spot or nearer futures.
The pessimism is also fueled by crude oil inventory inflation at the Cushing, Oklahoma storage hub, which has reached the highest level since June 2021.
US crude futures prices have fallen 12% this year, and have drifted sideways in a narrow range since early May as concerns regarding a possible slowdown in the US economy and a weak recovery in China’s economy grapple with Saudi-led supply cuts.
China’s apparent demand for oil last month rose 17% from a year ago as industrial production grew, according to official data released Thursday.
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