© Reuters. FILE PHOTO: Crude oil storage tanks are seen in an aerial photograph at the Cushing oil hub in Cushing, Oklahoma, U.S. April 21, 2020. REUTERS/Drone Base/File Photo
By Scott DiSavino
NEW YORK (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 output outweighed a massive surprise build in stocks.
futures rose $2.46, or 3.1%, to $82.56 a barrel by 1:14 p.m. EST (1814 GMT). U.S. West Texas Intermediate (WTI) crude rose $2.33, or 3.1%, to $77.45.
That puts both benchmarks on track to close the day at their highest since Dec. 30 with WTI up for a fifth day in a row for the first time since October 2022 and Brent up for a third day in a row for the first time since December 2022.
Global equities were up on hopes that U.S. inflation and earnings figures due on Thursday point to a resilient economy and slower pace of interest rate hikes.
If inflation comes in below expectations, that would drive the dollar lower, analysts said, which could boost oil demand because it makes the commodity cheaper for buyers holding other currencies.
The Federal Reserve will likely hike its target interest rate for the last time at its 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 was pinned on top oil importer China’s reopening of its economy after the end of strict COVID-19 curbs.
“China could bounce back strongly, especially if backed by monetary and fiscal stimulus. Central banks may discover they have room to cut rates if inflation falls substantially and economies are in recession,” said Craig Erlam, a senior market analyst at OANDA in London.
China’s overall passenger vehicle sales are estimated to rise 5% in 2023, Volkswagen AG (OTC:)’s China President Ralf Brandstaetter told Chinese media.
China’s industrial output is expected to have grown 3.6% in 2022 from the previous year, the Ministry of Industry and Information Technology (MIIT) said, despite production and logistics disruptions from COVID-19 curbs.
The U.S. Energy Information Administration (EIA) said crude inventories jumped by 19.0 million barrels last week, the third biggest weekly gain ever and the most since stocks rose by a record 21.6 million barrels in Feb 2021. Last week’s increase came as refiners were slow to restore production after a cold freeze shut operations in late 2022.
That compares with the 2.2 million-barrel decline in crude stocks that analysts forecast in a Reuters poll and industry data from the American Petroleum Institute (API), showing a 14.9 million-barrel build. [EIA/S] [API/S]
An international price cap imposed on sales of Russian crude took effect on Dec. 5 and more curbs aimed at products sales are set to come into force next month as the European Union keeps working on more sanctions against Moscow over the invasion of Ukraine.
Russian oil producers have had no difficulties in securing export deals despite Western sanctions and price caps, Russian Deputy Prime Minister Alexander Novak told a televised online government meeting.
