Oil prices move little in anticipation of more China cues
Oil prices stayed within a narrow range on Monday as traders awaited additional demand cues from key Chinese economic readings this week amid persistent concerns about high inflation and rising U.S. interest rates.
On Wednesday, the Purchasing Managers’ Index (PMI) readings for China for February are due. Even though the majority of anti-COVID measures were eased earlier this year, indicators for January had indicated a somewhat mixed economic recovery in the world’s largest crude importer.
It is anticipated that the manufacturing sector remained in contraction territory in February based on the data on Wednesday. Three years of COVID lockdowns have had the most severe impact on this industry, which is also experiencing a decline in foreign demand.
By 20:50 ET (01:50 GMT), Brent oil futures had increased 1% to $82.90 per barrel, while West Texas Intermediate crude futures had increased 2% to $76.45 per barrel.
Markets have become uncertain about the timing of a recovery in China, which is still struggling with high COVID-19 cases, despite the fact that a recovery in China is anticipated to drive global crude demand to record highs this year. In China, sluggish inflation and low manufacturing activity have also cast doubt on an immediate recovery.
Oil prices have traded lower so far this year due to concerns about rising interest rates and slowing economic growth, mixed demand signals, and these factors. Following U.S. inflation readings that were higher than anticipated, a strong dollar and a hawkish Federal Reserve have been the main causes of market anxiety.
This idea was supported by a strong reading on the Personal Consumption Expenditures index for January. Additionally, this week’s focus is on the U.S. nonfarm payrolls data due on Friday, which is anticipated to demonstrate job market resilience.
On Monday, the dollar held steady against a basket of currencies close to its two-month high.
Markets are concerned that rising interest rates could have a negative impact on economic activity and slow global demand for crude. Concerns about slowing demand in the world’s largest oil consumer have also been raised by a series of weekly increases in U.S. inventory.
However, in recent sessions, crude prices were supported by the possibility of a tighter global supply. As the third-largest oil producer in the world contends with Western price caps on its crude exports, media reports suggested that Russia’s planned supply cuts will be more extensive than initially stated.