Oil prices soared 3% to a one-week high on Wednesday as expectations for an improved global economic outlook and concern over the impact of sanctions on Russian crude output overshadowed a huge surprise build in U.S. crude stocks.
Brent futures jump 2.1%, or $1.67, to $81.77 a barrel by 11:11 a.m. EST (1611 GMT), while U.S. West Texas Intermediate crude (WTI) jumped 2.1%, or $1.54, to $76.66.
That puts both benchmarks on course to end the day at their highest since Jan. 3 with WTI up for a fifth consecutive day for the first time since October last year and Brent up for a third consecutive day for the first time since December last year.
Global equities rose slightly on Wednesday on hopes that U.S. inflation and earnings figures due on Thursday signal a resilient economy and reduced the pace of interest rate rises.
If inflation comes in lower than expectations, that would push the dollar lower, analysts said, which could increase oil demand because it makes the commodity less costly for buyers holding other currencies.
Much of the market’s optimism was pinned on major oil importer China’s reopening of its economy after the end of tight COVID-19 restrictions. Craig Erlam, a senior market analyst at OANDA in London, said:
“China could bounce back strongly, especially if backed by monetary and fiscal stimulus. Central banks may discover they have room to cut rates if inflation falls substantially and economies are in recession.”
China’s overall passenger vehicle sales are forecast to surge 5% this year, Volkswagen AG’s China President Ralf Brandstaetter told Chinese media.
China’s industrial output is expected to have expanded by 3.6% last year from a year earlier, the Ministry of Industry and Information Technology (MIIT) said, despite production and logistics disruptions from COVID-19 restrictions.
The U.S. Energy Information Administration (EIA) said crude inventories rose by 19.0 million barrels last week, its largest weekly gain since surging by a record 21.6 million barrels in Feb 2021.
Buy Crypto NowThat contrasts with the 2.2 million-barrel fall in crude stocks analysts forecast in a Reuters poll but is more in line with industry data from the American Petroleum Institute (API), showing a 14.9 million-barrel build.
“The crude oil number implies that the refineries are not up and running at all in this report. We’re well behind last year with the freeze-in levels. That is the problem,” said Bob Yawger, director of energy futures at Mizuho in New York.
An international price cap enforced on sales of Russian crude came into effect on Dec. 5 and more curbs aimed at product sales are set to take effect in February.
Russian oil producers have had no problems in acquiring export deals despite Western sanctions and price caps, Russian Deputy Prime Minister Alexander Novak told a televised online government meeting.
