Oil gains 3% on global economic optimism, despite surprise U.S. crude build

China reopens after COVID curbs, oil demand expected to rise HSBC sees just another US Fed interest rate hike. Crude stocks rise in surprise build, biggest since February 2021Russia sees no problem with oil exports despite sanctions

NEW YORK, Jan 11 (Reuters) – Oil prices rose 3% to a one-week high on Wednesday, as hopes for an improved global economic outlook and concern over the impact of sanctions on Russian crude production outpaced a massive surprise increase in US crude stocks. .

Brent futures were up $2.46, or 3.1%, at $82.56 a barrel by 1:14 p.m. EST (1814 GMT). West Texas Intermediate (WTI) crude was up $2.33, or 3.1 percent, at $77.45.

This puts both benchmarks on track to end the day at their highest since December 30 with WTI rising for the fifth consecutive day for the first time since October 2022 and Brent for the third consecutive day for the first time since December 2022.

Global shares rose on hopes that US inflation and earnings figures due on Thursday point to a resilient economy and a slower pace of interest rate hikes.

If inflation falls below expectations, that would push the dollar lower, analysts said, which could boost demand for oil because it makes the commodity cheaper for buyers holding other currencies.

The Federal Reserve is likely to raise its target interest rate for the last time on Jan. 31-Feb. 1 monetary policy meeting, raising it by 50 basis points (bps) to a range of 4.75%-5.00%, HSBC said in a research note.

Much of the market’s optimism rested on the reopening of China’s economy by major oil importer after the end of strict COVID-19 restrictions.

“China could bounce back strongly, especially if supported by monetary and fiscal stimulus. Central banks may find they have room to cut rates if inflation falls sharply and economies are in recession,” said Craig Erlam, a senior analyst at market at OANDA in London.

Overall passenger vehicle sales in China are estimated to grow by 5% in 2023, Volkswagen AG’s China president Ralf Brandstaetter told Chinese media.

China’s industrial output is expected to have grown 3.6% in 2022 from last year, the Ministry of Industry and Information Technology (MIIT) said, despite disruptions to production and logistics from the containment of COVID-19.

The U.S. Energy Information Administration (EIA) said crude inventories rose by 19.0 million barrels last week, the third-biggest weekly gain ever and the biggest since stocks rose by a record 21.6 million barrels in February. 2021. Last week’s increase came as refiners were slow to restore production after shutting down cold freeze operations in late 2022.

That compares with the 2.2 million-barrel drop in crude oil inventories that analysts forecast in a Reuters poll and industry data from the American Petroleum Institute (API), which showed a build of 14.9 million barrels. ,

An international price cap placed on sales of Russian crude went into effect on December 5, and more restrictions targeting sales of the product will take effect next month as the European Union continues to work on more sanctions against Moscow over the invasion. of Ukraine.

Russian oil producers have had no trouble securing export deals despite Western sanctions and price caps, Russian Deputy Prime Minister Alexander Novak said in a televised online government meeting. Read more

Additional reporting by Noah Browning in London, Sonali Paul in Melbourne, Trixie Yap in Singapore and Laila Kearney in New York; Editing by Marguerita Choy, David Goodman and David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

Scott Disavino

Thomson Reuters

Covers North American energy and natural gas markets.