Oil rises on China growth hopes

2 weeks ago 33
  • POLL-U.S. crude, gasoline stocks likely to have risen last week
  • China factory activity data due on March

LONDON, Feb 28 (Reuters) - Oil prices rose on Tuesday, erasing the previous session's losses, as hopes for a strong economic rebound in China offset worries about further increases to U.S. interest rates dragging on consumption in the world's biggest economy.

Brent crude futures for April , due to expire on Tuesday, were up by $1.28, or 1.6%, at $83.73 a barrel by 1442 GMT. The more active May contract rose $1.15, or 1.4%, to $83.19.

U.S. West Texas Intermediate (WTI) crude futures gained $1.33, or 1.8%, to $77.01.

Expectations of demand recovery in China underpinned gains, with the market awaiting key data over the next two days. Economists polled by Reuters expected that factory activity in the world's second-largest economy grew in February.

"China's economic recovery will drive its demand for commodities higher, with oil positioned to benefit the most," JPMorgan analysts said in a client note.

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JPMorgan's oil analysts maintained their 2023 average price forecast on Brent crude futures at $90 a barrel.

Gains were capped by the threat of more U.S. rate increases after stronger than expected new orders for core U.S. capital goods in January, with U.S. Federal Reserve Governor Philip Jefferson saying inflation for services remained "stubbornly high".

The voices of those expecting a 0.5% increase in interest rates by the Fed next month are getting louder, said PVM Oil analyst Tamas Varga.

The Organization of the Petroleum Exporting Countries (OPEC)has pumped 28.97 million barrels per day (bpd) this month, a Reuters survey found, up by 150,000 bpd from January. Output is still down more than 700,000 bpd from September.

The market will be looking to the latest U.S. oil stocks data from the American Petroleum Institute industry group on Tuesday and the government's Energy Information Administration on Wednesday for further demand indicators.

A preliminary Reuters poll showed analysts expect crude stocks grew by 400,000 barrels in the week to Feb. 24, which would mark a tenth consecutive week of builds.

Seven analysts polled also estimated that gasoline stocks rose by about 700,000 barrels. Distillate inventories, which include diesel and heating oil, were expected to have decreased by about 500,000 barrels last week.

Oil prices are expected to rise above $90 a barrel towards the second half of 2023 as Chinese demand recovers and Russian output falls, a Reuters poll showed on Tuesday.

Reporting by Ahmad Ghaddar Additional reporting by Trixie Yap in Singapore Editing by Bernadette Baum and David Goodman

Our Standards: The Thomson Reuters Trust Principles.

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