Oil heads for weekly gain on China demand hopes
Singapore — Oil prices fell on Friday, but were poised for a weekly gain as renewed optimism on China’s demand recovery overrode recession worries brought by growing crude inventories in the US and tightening monetary policy in Europe.
Brent crude futures fell 31c, or 0.4%, to $84.44 a barrel at 4.12am GMT. US West Texas Intermediate (WTI) crude futures were down 29c, also 0.4%, at $77.87 a barrel.
The retreat in oil prices came as eurozone inflation fell less than expected last month, which boosted expectations of further interest rate increases by the European Central Bank (ECB).
ECB President Christine Lagarde confirmed on Thursday the central bank is still looking to hike rates by a half a percentage point on March 16. Markets are also pricing in another 50 basis point hike in May.
Brent has climbed about 1.5% so far this week, on course for a second consecutive week of gains, while WTI has jumped about 2%, rebounding from a small loss the previous week on hopes of strong growth in fuel demand in China, the world’s top oil importer.
“Positive signs from the demand side have improved the market sentiment, allowing oil to withstand the pressures from a strong dollar following the robust US labour data,” said analysts from Haitong Futures.
The dollar index inched lower on Friday after surging 0.5% on Thursday as data showed the number of Americans filing new claims for unemployment benefits fell again last week.
A stronger greenback makes oil more expensive for holders of other currencies.
In China, activity in the services sector expanded at the fastest pace in six months in February as the removal of tough Covid-19 restrictions revived customer demand, a private sector survey showed on Friday.
Manufacturing activity in China also grew last month, at the fastest pace in more than a decade, reinforcing expectations of a fuel demand recovery. China’s seaborne imports of Russian oil are set to hit a record high this month.
The market shrugged off a 10th consecutive week of crude stock builds in the US, as record exports of US crude kept the build smaller than in recent weeks.
Russia’s plan to deepen oil export cuts in March, by up to 25% from the February level, also helped to buoy oil prices.
“A modest supply growth from the US, retreating Russian supplies and strong demand should pave the way for higher oil prices in the H2 2023,” ANZ analysts Daniel Hynes and Soni Kumari wrote on Friday.