Oil futures rose Tuesday as investors assessed data confirming a sharp slowdown in China’s economic growth last year, while looking ahead to a pickup in crude demand as the country unwinds its strict COVID-19 restrictions.
Market drivers
-
West Texas Intermediate crude for February delivery
CL00,
+0.71% CLG23,
+0.71%
rose 32 cents, or 0.4%, to $80.18 a barrel on the New York Mercantile Exchange. There was no settlement for WTI Monday because U.S. markets were closed for the Martin Luther King Jr. Day holiday. -
March Brent crude
BRN00,
+1.59% BRNH23,
+1.59% ,
the global benchmark, was up 95 cents, or 1.1%, at $85.41 a barrel on ICE Futures Europe. Brent fell 82 cents, or 1%, to close at $84.46 a barrel on Monday. -
Back on Nymex, February gasoline
RBG23,
+0.68%
was little changed at $2.534 a gallon, while February heating oil
HOG23,
-0.49%
edged up 0.2% to $3.263 a gallon. -
February natural gas
NGG23,
+8.04%
jumped 10.2% to $3.768 per million British thermal units.
Market drivers
China’s economy grew by 3% in 2022, less than half of the previous year’s 8.1% rate, official data showed Tuesday. That was the second-lowest annual growth rate since at least the 1970s after 2020, when growth fell to 2.4% at the start of the coronavirus pandemic.
China’s COVID curbs have been seen as a weight on crude demand, but a lifting of restrictions is expected to drive a substantial pickup. A surge in COVID-19 cases, however, has clouded the near-term outlook.
“We remain constructive and see asymmetric upside risk to the oil complex this year. Much of the conviction to our constructive tilt is geared toward 2H’23 with China’s reopening as a major driver underpinning that view,” said Michael Tran, energy strategist at RBC Capital Markets, in a note.
Global crude inventories, however, are set to build this quarter, he wrote.
“We see 2023 as a grind higher rather than gap higher type of market. However, the first couple of weeks of this year have suggested to us that a disconnect exists (for now) between the headline driven sentiment (mostly centered on China’s reopening) and what the physical market and term structure are telling us,” Tran said.