After plunging 2% the day before, oil prices modestly increased on Tuesday as the forecast for demand was supported by better-than-expected economic statistics from China, the world’s largest consumer of petroleum.
As of 0618 GMT, Brent crude was up 34 cents to $85.10 per barrel and U.S. West Texas Intermediate was up 29 cents to $81.12 per barrel.
According to official data, China’s economy expanded 4.5% year over year in the first quarter, above expectations. This was due to officials’ efforts to stimulate development in the wake of the stringent COVID-19 controls being lifted in December.
According to CMC Markets analyst Leon Li, “the remarkable recovery of the Chinese economy has supported the recent rebound in oil prices.”
Furthermore, May is China’s yearly high travel month, and he predicted that fuel demand will rise significantly year over year.
Refiners increased runs to take advantage of high export demand and build up supplies before scheduled maintenance, which resulted in a jump in Chinese refinery throughput that reached record levels in March and indicated strong demand for fuel.
According to the International Energy Agency (IEA), China will be largely responsible for the increase in global demand for crude oil in 2023.
The agency has however cautioned that the output reductions proposed by OPEC+ producers run the danger of escalating a supply imbalance anticipated in the second half of the year, which might harm consumers and slow down the recovery of the global economy.
According to National Australia Bank analysts, the rising yield on treasuries and a stronger currency are both continuing to put pressure on oil prices.
Along with interest rate increases, the dollar has been gaining, and traders anticipate that the U.S. Federal Reserve will increase its lending rate once more in May, which might dash expectations for an economic recovery.
For buyers using foreign currencies, a stronger dollar raises the price of commodities priced in the US currency.
According to data released by the Energy Information Administration on Monday, output of natural gas and crude oil in the seven largest shale basins in the United States is forecast to reach a record high in May, indicating a potential increase in supplies.
A preliminary Reuters poll released on Monday indicated that U.S. crude oil inventories likely decreased by roughly 2.5 million barrels last week. Data on U.S. crude stockpiles are scheduled to be released on Tuesday and Wednesday.
Edward Moya, a senior market analyst at OANDA, stated in a client note that “the oil market will soon have to deal with recession fears but for now it should be a choppy trade.”