Cold Weather Demand, Positive China Stimulus Move Buoy Oil Prices

Brent crude futures were up by 69 cents or 0.9 per cent to trade at $76.62 per barrel and the US West Texas Intermediate (WTI) crude futures gained $1.11 or 1.5 per cent to $74.24  a barrel.

For the week, Brent rose by 3.3 per cent while WTI made a 5 per cent increase.

The price was up on signs that the Chinese economic situation has created expectations of policy measures to boost growth in the world’s top oil-importing country.

Market analysts noted that China is stepping up in terms of their announcements about trying to stoke economic activity and the market is taking note of that.

Worries about Chinese demand were a factor in bearish demand assumptions last year, leading to major policy changes, including extensions by the Organisation of the Petroleum Exporting Countries and its allies, OPEC+.

The world’s largest oil importer announced a couple of new measures to boost growth this week with a surprise move to raise wages for government workers and the announcement of a sharp increase in funding from ultra-long treasury bonds.

The additional funding is to be used to spur business investment and consumer-boosting initiatives.

Also, weather lent support as early signals showed an expected increase in demand for heating oil- a product of crude oil – after forecasts for colder weather in some regions.

Based on trends, oil demand is more likely to benefit from cold temperatures across Europe and the US.

Supporting prices were US crude stockpiles dropping by 1.2 million barrels to 415.6 million barrels last week, according to data by the Energy Information Administration (EIA) just as US gasoline (petrol) and distillate inventories jumped as refineries ramped up output while fuel demand hit a two-year low.

However, a stronger US Dollar impacted prices which was on track for its best week in about two months.

A stronger greenback makes oil expensive for holders of other currencies.

This happened on expectations that the US economy will continue to outperform its peers globally this year and that US interest rates will stay relatively higher.

Higher rates increase borrowing costs, which can cut economic growth and oil demand.