Oil edges up on expected higher China demand

Washington — Crude oil prices rose slightly in early Asian trade on Tuesday in a market focused on prospects of demand recovery from top importer China and on the global economic outlook ahead of company earnings.

Brent crude had risen 5c to $88.24 a barrel by 1.16am GMT, while US West Texas Intermediate (WTI) crude rose 13c to $81.75 a barrel.

Crude oil prices in physical markets have started the year with a rally, as China, no longer held back by pandemic controls, has shown signs of more buying and as traders have worried that sanctions on Russia could tighten supply.

However, crude prices are wavering as the dollar stabilises and on exhaustion from headlines on China’s reopening, according to Oanda analyst Edward Moya.

In the US, “the economy still could roll over and some energy traders are still sceptical on how quickly China’s crude demand will bounce back this quarter”, Moya wrote in a note.

Demand for products has lifted the oil market and refining margins. The 3-2-1 crack spread, a proxy for refining margins, rose to $42.18 a barrel on Monday, the highest since October.

Investors have piled back into petroleum futures and options at the fastest rate for more than two years as concerns about a global business cycle downturn have eased.

US investors are confident the Federal Reserve will implement a small interest rate rise next week even as it remains committed to taming inflation, which recent data shows is slowing.

This week traders are watching for more business data that could indicate the health of global economies during an earnings reporting season.

Reuters