Crude Oil Price Rises
A weaker US currency and an increase in refinery operations in China, the world’s largest crude importer, helped the crude oil market rise by about 3% on Thursday to a one-week high.
According to data, the US West Texas Intermediate (WTI) gained by $2.35 or 3.4 percent to $70.62 per barrel, while Brent increased by $2.47 or 3.4% to settle at $75.67 a barrel yesterday.
US reports that retail sales unexpectedly increased in May and higher-than-expected jobless claims last week caused the US dollar to drop to a five-week low against a basket of other currencies and provided support for the oil market.
Oil consumption may increase as a result of lower crude prices for holders of foreign currencies due to a weaker dollar.
The throughput of China’s oil refineries increased by 15.4% in May compared to a year earlier, reaching its second-highest level ever, according to data released on Thursday.
According to analysts, it is anticipated that Chinese oil demand would increase for the rest of the year.
The Chinese economy is not rebounding as easily as previously anticipated, despite these expectations. The National Bureau of Statistics of China reported on Thursday that retail sales increased by 12.7% year over year in May, although they did so at a 5.7 percentage point slower pace than in April.
Additionally, industrial output climbed by 3.5% yearly in May, which was a lesser increase than the 5.6% gain in April. The Chinese data also revealed that the jobless rate for people between the ages of 16 and 24 reached an all-time high of 20.8%.
In its most recent monthly report, which was released on Wednesday, the International Energy Agency (IEA), which has been growing more positive about China, stated that “China’s rebound continues unabated, with its oil demand reaching an all-time high of 16.3 million barrels per day in April.”
The IEA increased its estimate of the world’s oil consumption for this year, anticipating an increase of 2.4 million barrels per day to a record-breaking 102.3 million barrels per day in 2023. This most recent prognosis for the rise in global oil consumption is higher than the one made last month, which predicted a rise in demand of 2.2 million barrels per day to 102 million barrels per day.
On the supply side, economists anticipate Saudi Arabia’s voluntary crude output cuts in July, along with those enacted in May by OPEC and its allies (OPEC+), to sustain prices at a period of high demand.
As predicted, the European Central Bank (ECB) increased interest rates on Thursday to a 22-year high. In order to combat the strong inflation, it indicated more policy tightening.
The US Federal Reserve held interest rates steady on Wednesday but hinted that they would rise by at least 0.5 percentage points by year’s end. Consumer borrowing costs would ultimately rise as a result of these higher interest rates, which might slow economic development and decrease oil demand.
