Oil prices rose 3% to a one-week high on Wednesday due to improved global economic outlook and Russian crude output concerns.
Brent futures rose $2.57, and WTI increased $2.29, with both benchmarks settling at their highest since Dec. 30. WTI was up for a fifth consecutive day, and Brent for a third consecutive day, according to Reuters on an article published on January 12, 2023.
Global equities rose on hopes for economic resilience and slower rate hikes. If inflation comes in lower than expected, it could weaken the dollar and boost oil demand. The Fed is likely to hike its target rate one last time at its Jan. 31-Feb. 1 meeting, by 50bps to a range of 4.75%-5.00%, according to HSBC.
The market is optimistic about China’s reopening of its economy after COVID-19 restrictions, with expectations of a surge in oil demand. Edward Moya, senior market analyst at OANDA, stated that energy traders should expect higher oil prices as demand returns and China’s demand is expected to skyrocket. Volkswagen AG’s China President Ralf Brandstaetter also predicts a 5% increase in overall passenger vehicle sales in China in 2023.
China’s industrial output grew 3.6% in 2022 despite COVID-19 disruptions. US crude inventories rose 19 million barrels last week, and production is forecast to hit new highs in 2023 and 2024.
An international price cap for Russian crude took effect in December, with more curbs set for February 2021. Russia’s oil producers have not faced difficulties with export deals despite Western sanctions and price caps, according to Russian Deputy Prime Minister Alexander Novak.