Traders shrugged off persisting concerns over sluggish Chinese demand
Oil prices hit fresh January highs even as equity investors turned cautious ahead of key US inflation data due later in the day. Also, traders shrugged off persisting concerns over sluggish Chinese demand. As a reminder, the data this week showed that China’s oil imports sank to their second-lowest level this year in July. Consumer sector also fell into deflation and factory-gate prices extended declines last month. On the positive side, however, Beijing is now expected to roll out more stimulus measures in the months to come.
The market was supported by government data on Wednesday that showed that US gasoline stocks fell by 2.7 million barrels last week, while distillate inventories dropped by 1.7 million barrels. On the other hand, the report also showed that crude stockpiles rose by nearly 6 million barrels last week while crude production hit a three-year high at a projected 12.6 million barrels per day — a level not seen since March 2020 when the coronavirus pandemic began.
As such, Brent crude briefly jumped above $88 a barrel before retreating marginally in recent trading. Oil prices have been rising for the seventh week in a row, preserving the upside momentum since June on expectations of tighter global supplies.
In the near term, however, oil futures could struggle to extend the ascent as the dollar may attract renewed demand if the inflation report surprises to the upside. The USD index peaked at 102.80 earlier in the week before losing the upside momentum. Since then, the greenback has slipped towards 102.20. The dollar has been trading in negative territory since Wednesday, while still staying above the 102.00 handle ahead of the CPI report.
