Oil Edges Higher at Start of Week on Optimistic Demand Outlook
(Bloomberg) — Oil rose as investors weighed the outlook for China’s demand recovery and the prospect of less restrictive monetary policy from the US.
West Texas Intermediate futures climbed above $74 a barrel on Monday after ending last week 8% lower. An official at China’s central bank said the nation’s growth would be back on track soon as Beijing provides more financial support to households and companies, according to an interview with People’s Daily.
“It will take some time before the impact of China’s reopening of borders can be felt,” said Sean Lim, an analyst at RHB Investment Bank Bhd in Kuala Lumpur. “Concerns over soft demand remain, but OPEC+ should still be a major price support. We expect a more balanced oil market in the medium term.”
The Federal Reserve may lean toward smaller interest-rate rises after wage growth cooled in December, another stepdown in its aggressive campaign of monetary tightening. That’s put pressure on the US dollar and added to tailwinds for commodities priced in the currency.
Oil has had a weak start to 2023 as forward curves signal ample supply and thin liquidity leaves futures prone to wild swings. However, there’s a growing chorus of bullish voices, with top hedge fund manager Pierre Andurand saying crude could exceed $140 a barrel this year if Asia fully re-opens after Covid-related lockdowns.
The Biden Administration is delaying purchases to refill the emergency oil reserve after deciding that the offers it received were either too expensive or didn’t meet the required specifications, according to people familiar.
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