© Reuters. FILE PHOTO: Crude oil storage tanks are seen from above at the Cushing oil hub, in Cushing, Oklahoma, March 24, 2016. REUTERS/Nick Oxford
By Scott DiSavino
NEW YORK (Reuters) – Oil prices rose more than 1% on Thursday on expectations that global demand will strengthen as top oil importer China reopens its economy and on positive U.S. economic data.
futures rose $1.18, or 1.4%, to $87.30 a barrel by 11:42 a.m. EST (1642 GMT), while U.S. West Texas Intermediate (WTI) crude rose $1.12, or 1.4%, to $81.27.
Earlier in the session, WTI was on track for its highest close since Nov. 16. Currently, however, both Brent and WTI were on track for their highest closing levels since Jan. 23.
“WTI is deriving some support from liquidation of NYMEX (New York Mercantile Exchange) crack spreads as products begin to shift focus” from bullish supply disruptions in December to weaker demand, analysts at energy consulting firm Ritterbusch and Associates said in a note.
U.S. crack spreads – measures of refining profit margins – rose earlier this week to their highest since August for gasoline and October for the 3:2:1 (three barrels of crude makes two of gasoline and one of distillates).
The U.S. economy grew faster than expected in the fourth quarter as consumers maintained a solid pace of spending, but momentum had slowed significantly by the end of the year, with higher interest rates eroding demand.
Meanwhile, inventories edged up by 533,000 barrels to 448.5 million barrels in the week ending Jan. 20, the Energy Information Administration (EIA) said.
That was short of forecasts for a 1 million barrel rise, though the EIA says crude stocks are at their highest since June 2021.
“China’s reopening is supporting demand prospects,” said UBS analyst Giovanni Staunovo.
“Also, market participants are closely tracking the upcoming OPEC+ JMMC meeting and the EU embargo on refined products.”
China has been easing stringent COVID-19 restrictions this month, with Beijing reopening its borders for the first time in three years.
“(Commodity) markets are set to tighten significantly should the reopening in China – the world’s largest driver of commodity demand – be orderly, and … we anticipate conditions to be ripe for commodity investor inflows,” MUFG analyst Ehsan Khoman said.
The OPEC+ ministerial panel meeting on Feb. 1 is likely to endorse the oil producer group’s current output levels, OPEC+ sources said.
Global economic growth is forecast to barely move above 2% this year, a Reuters poll of economists showed, suggesting that a further downgrade is possible. That was at odds with widespread optimism in markets since the beginning of the year.