Oil inched higher as optimism for a revival in Chinese demand overshadowed risk-off sentiment that hampered prices at the end of the session.
West Texas Intermediate rose 0.4% to settle above $80 a barrel on Tuesday. The world’s largest crude importer’s economy grew more than anticipated in the fourth quarter as virus curbs swiftly ended. Prices pared some gains at the end of the session as risk-off sentiment prevailed on broader markets and equities declined.
“Over the near term, rising product exports and directionally improving consumer demand will continue to support strong Chinese refinery runs and crude imports,” RBC Capital Markets analyst Michael Tran wrote in a note to clients.
The rising sense of optimism sent a jolt of liquidity into markets with the number of oil futures contracts held by traders rising to the highest since June.
Much of Wall Street remains bullish on oil, with Goldman Sachs Group Inc. reiterating its case for higher crude prices. Commodity markets are now pricing in a recession “that we don’t believe is going to materialize,” the bank said in a Jan. 16 note.
Crude has had a rocky start to 2023, sinking in the opening week on concerns over a global slowdown, before rebounding. Aside from China, oil has found support from a weakening dollar and growing expectations that the Federal Reserve is nearing an end to its aggressive series of interest-rate hikes. Meanwhile, Saudi Arabia floated the idea of trading crude in currencies other than the US dollar.
WTI for February delivery rose 32 cents to settle at $80.18 a barrel in New York following a US holiday.
The contract closed at $79.86 on Friday.
Brent for March settlement rose $1.46 to settle at $85.92 a barrel.
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