Oil rose as stronger demand in China outweighed concerns about further interest rate hikes in the US.
West Texas Intermediate futures neared a one-week high of $71 a barrel on Thursday. China this week issued larger crude import quotas than a year earlier and a stimulus package the nation is considering raised hopes for higher demand. While the pace of growth lagged some market participants’ expectations, it was enough to offset the Federal Reserve’s warning of higher-than-expected borrowing costs.
“A bit of good news from China can help oil prices a lot as that has been the focal point for demand,” said Stacey Morris, head of energy research at VettaFi.
Still, renewed concerns about the recession are showing up in futures’ time spreads. Brent’s rapid spread turned into contango, and WTI’s contango widened to its most bearish level since February. Rising crude inventories at the Cushing, Oklahoma storage hub, which have hit their highest level since June 2021, are adding to the bearish sentiment.
U.S. crude futures have lost 12 percent this year and drifted in a narrow range since early May as concerns about a possible U.S. slowdown and a weak Chinese economic recovery battle with supply cuts led by Saudi Arabia. China’s apparent oil demand last month rose 17% from a year ago, while industrial output also rose, according to official data released on Thursday.
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