Business
Oil holds advance as broad China stimulus plan aids sentiment
Oil held onto a sharp overnight gain that was driven by signs China is shifting into stimulus mode and a US plan to replenish reserves.
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West Texas Intermediate traded above $69 a barrel after rising 3.4 percent on Tuesday, the most in more than five weeks. Beijing is considering a broad range of stimulus measures to revive China’s flagging recovery after already having taken steps to loosen monetary policy. The country also issued a fresh crude import quota for non state-owned refiners and traders for 2023.
The US is planning to buy about 12 million barrels of oil this year to refill its depleted emergency reserves, according to people familiar. Slowing inflation is also adding to expectations the Federal Reserve will pause interest-rate hikes for the first time in 15 months.
Crude is still down about 17 percent since mid-April as a worsening demand outlook and resilient exports from Russia — despite pledged output cuts — weighed on prices. However, the more bullish signals emanating from China and the US, and an OPEC report that suggested Saudi Arabia’s output cuts will succeed in tightening supply in the second half, are aiding sentiment.
The recent gains have been mainly “a reaction to China’s monetary policy support,” said Yeap Jun Rong, a market strategist for IG Asia Pte in Singapore. “The broader risk-on environment and a weaker US dollar over the past days haven’t been able to ignite much of a positive reaction for oil prices, suggesting demand remains the key driver,” he said.
Investors will also be watching for the International Energy Agency’s monthly report, due later Wednesday, for insight on the state of the market.
The industry-funded American Petroleum Institute reported US nationwide crude inventories expanded by 1 million barrels last week. Gasoline and distillate stockpiles, and supplies at the Cushing, Oklahoma storage hub also rose. Official data is due later Wednesday.
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