Oil Gains as Global Recession Concerns Subside
Crude oil gained today as global recession worries begin to subside. Analysts expect demand to recover in China. OPEC is not likely to change its output cut decision either, Reuters reported.
Brent crude went up 0.3%, or 22 cents to $86.35 a barrel early this morning after losing just over 2% in the prior session. US West Texas Intermediate (WTI) crude rose 0.2% or 13 cents to $80.26 per barrel, after losing 1.8% yesterday.
Bank of America Securities analysts expect the reopening of the Chinese economy to release a large wave of pent-up demand over the next year and a half.
Oil supply to remain steady
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+, will likely maintain their output quotas, so oil supply is expected to hold steady for the medium term. On Tuesday, OPEC+ sources said a panel of theirs would probably approve the major oil production group’s current output policy when it meets next week.
Concerns over the world economy and inflation balance out the hopes for higher demand from China.
Change of plans
In October 2022, OPEC+ decided to cut production by 2 million barrels a day starting in November to continue throughout 2023 based on a weaker economic outlook. However, higher than anticipated stock in US oil inventories capped gains in oil prices. This was reported on Tuesday, after the market settled.
Insiders citing American Petroleum Institute data informed US crude stocks had risen by about 3.4 million barrels last week. That was three times the prediction of around 1 million, made in a preliminary Reuters poll on Monday.
Markets await rate decisions
Markets are also waiting for central banks’ interest rate decisions for more trading cues. IG market analyst Yeap Jun Rong told Reuters in a note:
It seems that the absence of hawkish Fed comments from the current blackout period has removed a key overhang for risk sentiments for now, providing some renewed traction back into growth.