Oil treads water as rising US supplies and looming rates hikes lower optimism

Singapore — Oil prices were little changed in early Asian trade on Monday, after settling down $2 a barrel on Friday, as rising supplies in the US and forecasts of more interest rate hikes cooled optimism over China’s demand recovery.

Brent crude slid 9c, or 0.1%, to $82.91 a barrel by 2.51am. US West Texas Intermediate crude for March, which expires on Tuesday, was at $76.40 a barrel, up 6c. The more active April contract fell 9c to $76.46.

The benchmarks closed lower by about 4% last week after the US reported higher crude and petrol inventories.

Washington also announced plans to release 26-million barrels of crude from the Strategic Petroleum Reserve (SPR) that could lead to higher stockpiles at Cushing, Oklahoma, the delivery point for WTI contracts, until May, Energy Aspects analysts said in a note.

Expectations that the US Federal Reserve will continue raising interest rates, which could strengthen the dollar, also capped oil prices. A stronger greenback makes dollar-denominated oil more expensive for holders of other currencies.

In another sign of improving supplies, Kazakhstan will supply 100,000 tonnes of oil via Russia’s Druzhba pipeline to Germany in March for the PCK Schwedt refinery.

In Asia, investors are eyeing the People’s Bank of China’s decision on its mortgage rates to support recovery in the property sector and its economy, CMC Markets analyst Tina Teng said. China is the world’s largest crude oil importer.

Analysts expect China’s imports to hit an all-time high in 2023 due to increased demand for transportation fuel and as new refineries come on stream.

China, with India, have become top buyers of Russian crude after the EU embargo.

India’s Russian oil imports hit a record 1.4-million barrels per day in January, trade data showed.

Reuters