Futures Movers: Oil edges higher as traders weigh U.S. inventory jump, China demand

by | Jan 11, 2023 | Stock Market

Oil futures edged higher Wednesday as investors attempted to gauge China’s demand outlook, and industry data showed a surge in U.S. crude inventories.Price action
West Texas Intermediate crude for February delivery
CL00,
+2.10%

CL.1,
+2.10%

CLG23,
+2.10%
rose 29 cents, or 0.4%, to $75.41 a barrel on the New York Mercantile Exchange.

March Brent crude
BRN00,
+2.07%

BRNH23,
+2.07%
was up 47 cents, or 0.6%, at $80.57 a barrel on ICE Futures Europe.

Back on Nymex, February gasoline
RBG23,
+2.73%
jumped 1.5% to $2.363 a gallon, while February heating oil
HOG23,
+2.41%
gained 1.3% to $3.176 a gallon.

February natural gas
NGG23,
+2.67%
gained 3.2% to $3.757 per million British thermal units.

Market drivers Crude oil futures were ticking higher, remaining within a recent range. Crude has been underpinned by expectations China’s reopening from COVID-19 will boost demand from one of the world’s largest energy consumers.

But investors were also grappling with fears of a potential global economic slowdown as the Federal Reserve and other major central banks continue to tighten monetary policy in their effort to rein in inflation. Meanwhile, the U.S. Energy Department last week rejected offers for purchases of crude to begin refilling the Strategic Petroleum Reserve, according to news reports. Crude has been underpinned by expectations the government would move to repurchases crude for the SPR near $70 a barrel. Trader conviction “is low given renewed hopes for a soft landing and optimism about China reopening (bullish) being weighed against economic uncertainties and growing concerns about the Department of Energy’s commitment to buy oil at $70/barrel due to funding and liquidity issues (bearish),” wrote analysts at Sevens Report Research in a Wednesday note. Crude was attempting to shake off industry data that showed a sharp rise in U.S. crude inventories and a build in stocks of oil products. The American Petroleum Institute late Tuesday said U.S. crude inventories rose 14.9 million barrels last week, according to a source citing the figures, while gasoline stocks rose 1.8 million barrels and distillates were up 1.1 million barrels. The Energy Information Administration’s more closely followed report is due Wednesday morning. Analysts surveyed by S&P Global Commodity Insights, on average, looked for crude inventories to fall by 500,000 barrels, while gasoline supplies were expected to rise 1.3 million barrels and distillates were seen up 500,000 barrels. Meanwhile, the U.S. and its allies are preparing their next round of sanctions on Russia’s oil industry, which are aimed at capping the sales prices of Russian exports of refined petroleum products. Some market watchers warn the move could squeeze global supply. In meetings across Europe this week, officials are discussing the details of the coming sanctions on Russian oil products, which are set to go into effect on Feb. 5. The penalties would set two price limits on Russian refined products: one on high-value exports such as diesel and another on low-value ones such as fuel oil, The Wall Street Journal reported, citing people familiar with the plans. See: U.S. and allies planning new sanctions on Russian oil industry

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