Oil prices rose by more than 1.5% for the third consecutive session at the end of trading today, Wednesday, February 8 (2023), with optimism about the demand for crude and the decline of the US dollar.
This comes despite the rise in oil stocks in the United States for the seventh week in a row, and the rise in stocks of gasoline and distillates.
Oil prices today
At the end of the session, the prices of benchmark Brent crude futures – April 2023 delivery – increased by 1.7%, to reach $85.09 a barrel.
The price of US West Texas crude futures – delivery in March 2023 – increased by 1.7%, to $78.47 a barrel, according to data seen by the specialized energy platform.
And oil prices ended their trading, yesterday, Tuesday, February 7, with an increase of more than 4%, supported by optimism about demand in China.
Oil market conditions
Oil prices are expected to hold support after Federal Reserve Chairman Jerome Powell appeared less hawkish on interest rates than markets had expected, while recent data showed a decline in US crude oil inventories despite earlier expectations of an increase.
“It appears that the improved risk sentiment in the wake of Fed Chair Jerome Powell’s comments, along with the decline in the US dollar, has exploited some bullishness in oil prices, which have been underperforming since end of January.”
“The reservation is that the overnight negative reaction in the dollar was more calculated than it used to be,” Yip added.
He noted that any sustained recovery in the dollar could remain a headwind for oil prices, Reuters reported.
The dollar index – which measures the US currency against a basket of 6 major currencies – fell slightly today, Wednesday, extending its losses after Powell’s comments on Tuesday, which made oil cheaper for those who have other currencies.
demand for oil
With less interest rate increases in the US, the market is hoping that the world’s largest economy and oil consumer can avoid a sharp slowdown in economic activity or even a recession and avoid a decline in oil demand.
“I think we’re in a reasonably balanced market,” said Westpac chief economist, Justin Smirke, according to Reuters.
He added, “If we have stronger growth than expected from the developing world, oil prices will improve and OPEC will have to increase production. This is not our basic view, as we do not see a significant increase in demand.”
US oil stocks
The weekly data of the US Energy Information Administration showed that oil stocks increased by about 2.4 million barrels in the week ending February 3, to continue to rise for the seventh consecutive week.
This contradicted the expectations of 9 analysts – polled by Reuters – who estimated the growth of crude inventories by about 2.5 million barrels.
Gasoline and distillate inventories rose more than expected by about 5 and 2.9 million barrels, respectively.
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