Oil prices were mostly flat on Thursday, giving up gains made earlier in the day, as optimism about China’s demand outlook was tempered by caution over upcoming U.S. inflation data.
The Brent crude It was trading flat at $82.67 a barrel at 0725 GMT, while the West Texas Intermediate The U.S. fell 4 cents, or 0.05 percent, to $77.37 a barrel.
Both benchmarks had risen 3% in Wednesday’s session, buoyed by hopes of an improved global economic outlook and concerns about the impact of sanctions on Russian crude production. [O/R]
“China is accelerating the buildup of crude reserves ahead of the Lunar New Year holiday, as demand prospects have improved amid a 180-degree turn in its COVID policy,” said Tina Teng, an analyst at CMC Markets.
China, the largest oil importer, is reopening its economy following the end of strict COVID-19 restrictions, raising optimism that fuel demand will grow in 2023.
Its industrial production is expected to have grown 3.6% in 2022 from the previous year, the Ministry of Industry and Information Technology said, despite disruptions in production and logistics stemming from COVID-19 restrictions.
“There is continued optimism in the oil market fueled by China’s reopening and, as the Chinese New Year approaches, increased travel should support demand for gasoline and jet fuel,” said Serena Huang, head of APAC analysis at Vortexa.
Outbound flight bookings in China soared, but still only reached 15% of pre-pandemic levels in the week following the country’s announcement it would reopen its borders, travel data firm ForwardKeys said on Thursday.
However, upcoming U.S. inflation data is a key risk factor for oil, added CMC Market’s Teng. This is leading traders to be cautious ahead of the release of the data on Thursday.
Economists expect U.S. consumer price growth to slow to an annual pace of 5.7 percent in December, down from 6 percent the previous month. Month-on-month inflation would be at zero.
The market is also bracing for further cuts in Russian fuel sales, which take effect in February, as the European Union continues to prepare more sanctions against Moscow over the invasion of Ukraine.
The U.S. Energy Information Administration said the upcoming EU ban on maritime imports of petroleum products from Russia on Feb. 5 could be more damaging than the bloc’s ban on maritime imports of crude oil from Russia enforced in December.
On December 5, an international price cap imposed on sales of Russian crude came into force.