Brent inches higher on positive US GDP outlook, China optimism

Front-month ICE Brent has gained by $2.06/bbl on the day, to $88.15/bbl at 09.00 GMT. The futures contract is almost unchanged on the week, only adding 0.60%.

PHOTO: Getty Images

Upward pressure:

According to the US Bureau of Economic Analysis' (BEA) first advanced estimate, the US economy increased at an annual rate of 2.9% during the fourth quarter of 2022. A second estimate with more comprehensive data will be released on 23 February.

“The increase in private inventory investment was led by manufacturing as well as mining, utilities, and construction industries. The increase in consumer spending reflected increases in both services and goods,” writes the BEA.

“Crude prices got an unexpected boost from a US economy that doesn’t want to break,” says Edward Moya, senior market analyst at OANDA. He adds that the BEA data “supported the argument that this economy still could get a soft landing, which is very positive for the short-term crude demand outlook.”

China’s number of daily Covid-19 deaths in hospitals have declined by 79%, and critical Covid-19 cases are down by 72%, from a peak earlier in January, Reuters reports, citing data from the Center for Disease Control and Prevention.

“Improving news with China’s COVID situation and a resilient US economy should keep oil prices supported above the $80/bbl region,” adds Moya.

Downward pressure:

The United Nations (UN) expressed concern that the global economy heading towards a long period of slow growth in its annual World Economic Situation and Prospects report.

“A broad-based and severe slowdown of the global economy looms large amid high inflation, aggressive monetary tightening, and heightened uncertainties. Many economies are at risk of falling into recession, having barely recovered from the shock of the pandemic,” said António Guterres, Secretary-General of the UN.

By Konica Bhatt

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