Oil prices rise as investors seek riskier assets and on China demand outlook
Oil storage tanks are seen from above in Carson, California.
Robyn Beck | AFP | Getty Images
Oil prices climbed on Wednesday, paring losses from the previous session, as investors turned to riskier assets such as commodities amid gains in broader equity markets and signs of a renewed demand from the main oil importer, China.
Crude Brent futures for the December settlement rose 22 cents, or 0.2%, to $90.25 a barrel at 0620 GMT.
West Texas Intermediate American Crude for November delivery was at $83.50 a barrel, up 68 cents, or 0.8%. WTI’s first-month contract expires Thursday and the most active December contract was $82.66, up 59 cents, or 0.7%.
In the previous session, Brent fell 1.7% and WTI 3.1% to their lowest level in two weeks following reports of US President Joe Biden’s plans to release more barrels from the reserve. Petroleum Strategy (SPR).
Oil prices were also supported as risk sentiment was boosted by upbeat US corporate earnings and rising equity markets.
“The slight rebound in oil prices is more likely due to more positive sentiment on equity markets and the return of risk to trading [rather] than industry fundamentals,” said Suvro Sarkar, senior energy analyst at DBS Bank in Singapore.
Prices were also supported by signs of a resurgence in Chinese demand. Private mega-refiner Zhejiang Petrochemical Corp (ZPC) got an additional 2022 crude oil import quota of 10 million tons and state-owned ChemChina got an additional quota of 4.28 million tons. This equates to approximately 104 million barrels.
The impending European Union ban on Russian crude oil and petroleum products and production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, a group known as the name of OPEC+, 2 million barrels per day also kept prices high.
The OPEC+ cut and EU embargo will squeeze supply in an already tight market. EU sanctions on Russian crude oil and petroleum products will come into effect in December and February respectively.
“With the EU ban on Russian crude looming in early December, we would still be broadly bullish than bearish on oil at current levels,” DBS’s Sarkar said.
To close the gap, President Biden will announce a plan later Wednesday to sell the remainder of his release from the SPR and detail a strategy for rebuilding the stock when prices fall, a senior administration official said.
In December, the administration plans to sell 15 million barrels of oil from its reserves, the latest tranche of the 180 million barrel release announced earlier this year, a senior U.S. official said.
U.S. crude oil inventories fell about 1.3 million barrels for the week ended Oct. 14, market sources said, citing figures from the American Petroleum Institute on Tuesday. Gasoline inventories fell by about 2.2 million barrels while distillate inventories fell by 1.1 million, the sources said.
U.S. crude inventories are expected to have risen for a second straight week, rising 1.4 million barrels in the week to Oct. 14, according to an extended Reuters poll on Tuesday.
Inventory data from the Energy Information Administration, the statistical arm of the US Department of Energy, is due at 10:30 a.m. (1430 GMT) on Wednesday.