Oil rose along with many other commodities as optimism over Chinese demand countered concerns over a global economic slowdown.
West Texas Intermediate increased as much as 1.5 per cent on Friday, and were heading for a third straight weekly gain. Spain’s economy expanded more than expected last quarter, adding to bullish sentiments a day after similar data from the US helped ease fears over a recession. Trafigura Group sees “a lot of upside” for oil markets as pent-up demand is unleashed, especially as Chinese consumption rebounds.
Crude has recovered from a steep slump at the start of the year and liquidity is returning to the futures market. A lot of the optimism is because of China, which reported higher mobility with a 120 per cent jump in trips out of the country in the first six days of the Lunar New Year holiday this week compared with last year. It’s bringing some confidence about a rebound in the world’s biggest oil importer after it exited strict Covid restrictions.
The oil market is also starting to indicate signs of tightness after a period of weakness. The prompt spread for global benchmark Brent — the gap between the two nearest contracts — firmed in a bullish backwardation pattern after spending most of the past two months in contango.
“The slow grind higher is continuing,” said Paul Horsnell, head of commodities research at Standard Chartered. “There’s a general positive sentiment. All the ingredients for a gradual grind up to test $90 for Brent” are coming together, he said.
Prices
- WTI for March delivery rose 1.2 per cent to $81.99 a barrel at 10:36 a.m. in London.
- Prices were 0.9 per cent higher for the week.
- Brent for the same month was 1.2 per cent higher at $88.55.
Attention is now shifting to the potential fallout from European Union sanctions on Russia’s seaborne shipments of petroleum products early next month.
The EU is considering a plan to cap the price of premium refined fuel exports like diesel at $100 a barrel, as well as banning seaborne imports into Europe. Goldman Sachs Group Inc. has warned that the new sanctions are likely to be more disruptive than those on Russian crude which came into effect late last year. UBS Group AG estimates the limits could force Russia to curb oil output.
© 2023 Bloomberg L.P.
