Oil extends rebound on positive demand cues, but still set for weekly losses
By Ambar Warrick
Investing.com-- Oil prices extended their recovery into a second straight session on Friday after U.S. inventory data and a reopening in the China-Hong Kong border spelled some positive trends for demand, although fears of a looming recession still kept crude on course for steep weekly losses.
While data from the Energy Information Administration showed that U.S.
grew slightly more than expected in the last week of December, a bulk of this growth was driven by a nearly 3 million barrel release from the Strategic Petroleum Reserve.
A sharp drop in distillates and shrinking gasoline inventories also showed that crude consumption remained strong through the holiday season.
China, the world’s largest crude importer, said on Thursday that it will reopen its border with Hong Kong by January 8, in another step away from the country’s strict zero-COVID policy. The move ramped up expectations of an eventual economic recovery in the country, which is expected to spur a sharp bounceback in oil demand.
Brent oil futures rose 0.8% to $79.44 a barrel, while West Texas Intermediate crude futures rose 1.1% to $74.44 a barrel by 21:23 ET (02:23 GMT). While both contracts marked a second straight day of recovery from three-week lows, they were still set to lose about 7.5% this week after a dismal start to the new year.
Strength in the dollar limited gains in crude prices on Friday, as investors awaited U.S. nonfarm payrolls data that is expected to show some easing in the country’s tight jobs market.
But markets were wary of any signs of resilience in the jobs market, which could give the Federal Reserve more headroom to maintain its hawkish rhetoric.
The minutes of the central bank’s December meeting showed that policymakers support smaller rate hikes in the coming months. But they also called for U.S. interest rates to stay higher for longer, a scenario that could weigh further on economic activity, and dent crude demand.
Oil prices plummeted in the first two sessions of 2023 after the International Monetary Fund warned of a potential recession in several major economies. Weak economic prints from the world’s two largest oil consumers - the U.S. and China - added to concerns over a recession, as both countries saw manufacturing activity shrink in December.
Rising COVID-19 cases in China also brewed fears of a staggered reopening in the country, even as the government moves further away from its strict zero-COVID policy. The country is dealing with its worst-yet COVID-19 outbreak, which analysts warn could stymie economic growth in the near-term and cause increased market volatility.
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.
Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb
Drop an image here or