Oil rose as traders took stock of China’s efforts to accelerate its economy and strengthening demand from Asian buyers.
Prices reversed early losses and held higher after China’s vice premier was reported to have said the economy was in good shape. Later, Brent futures broke above their 50-day moving average for the first time since late April, providing fresh support for prices.
“WTI crude oil prices are finally stabilizing above the $70 level as energy traders anticipate that the start of summer would keep demand steady over the coming months,” said Ed Moya, senior market analyst at Oanda Corporation.
In physical markets, Middle Eastern oil prices have risen amid a flurry of refinery purchases in China and Japan. Alongside heavy activity in a key trading window, spot spreads for some grades have more than doubled over the past week, an unusually large move for such a time period.
Oil has fallen in the first half of this year as China’s resurgence of its strict Covid Zero policies has failed to gain traction and global crude supplies, including from Russia, remain plentiful. In response, the Organization of the Petroleum Exporting Countries and its allies announced supply cuts to try to tighten the market.
“I think going forward we see the market continuing to tighten and inventories continuing to come down,” shale producer EOG Resources Inc Chief Operating Officer Billy Helms said on a conference call on Wednesday.
“Last year, you have to keep in mind that inventories were up largely because of the SPR releases, and so without that, the inventory will be much shorter than we are today.”
Meanwhile, in prepared remarks Wednesday, Fed Chairman Jerome Powell underscored the bank’s determination to curb inflation and suggested further interest rate hikes are likely.
Prices:
- WTI for August delivery added $2.03 to settle at $72.53 a barrel in New York.
- Brent for August settlement gained $1.22 to settle at $77.12 a barrel.
