Optimism around China's oil demand growth boosts Brent
Front-month ICE Brent has gained by $0.75/bbl on the day, to $85.96/bbl at 09.00 GMT.
PHOTO: Sinopec's 540,000 b/d Zhenhai Refining & Petrochemical plant in Ningbo, east China. CGTN
Upward pressure:
China's newly announced 5% GDP growth target was initially greeted with disappointment, but analysts later reasoned that the world’s biggest oil importer has set a lower economic growth target to go beyond expectations.
“Oil prices are dipping as China sets an easy-to-reach growth target of just 5%,” said Phil Flynn, senior account executive at The Price Futures Group. “But if you look at the surrounding evidence for the Chinese reopening, it’s clear that China most likely is going to aim low so they can exceed expectations.”
In an interview with CNBC, Saudi Aramco’s chief executive Amin Nasser yet again warned of tightening global oil supply, this time citing “persistent underinvestment” and “decreased production” amid slower drilling activity. Nasser has repeatedly urged caution against escalating energy wars caused by shortages of global oil supplies, and depleting spare capacity due to rising oil demand.
Downward pressure:
China imported 84.06 million mt (10.44 million b/d) of crude oil in January-February, according to customs data accessed by XM Global Research. This is 1.25% lower than China's crude oil imports in the first two months of last year, which stood at 85.13 million mt (10.57 million b/d).
US Federal Reserve’s (Fed) chairman Jerome Powell will present the semi-annual monetary report to the US Congress today. Powell is likely to “underscore the view” that Fed’s benchmark interest rate will “go higher than anticipated,” says Daniel Hynes, commodity strategist at ANZ.
The Atlanta and Boston Fed presidents have also expressed support for raising interest rates. Higher interest rates can result in higher borrowing costs, which may reduce fuel demand.
By Konica Bhatt
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