China’s Trade Optimism: Oil Prices Maintain Uplift on Positive Signals
On March 7, oil prices maintained stability, retaining gains from the previous day’s positive developments, including encouraging Chinese trade data and a U.S. report indicating a smaller-than-expected increase in crude inventories and significant draws in fuel stocks. However, the prospect of delayed U.S. interest rate cuts restrained further gains.
Brent crude futures saw a marginal decrease of 4 cents to reach $82.92 per barrel by 0432 GMT, while U.S. West Texas Intermediate (WTI) crude futures edged down by 1 cent, settling at $79.12 per barrel. Despite China’s exceeding estimates in import and export growth, concerns about potential delays in U.S. interest rate cuts tempered the upward momentum.
Auckland-based independent analyst Tina Teng acknowledged the positive impact of China’s trade balance data on the oil market’s demand outlook. However, she noted a prevailing risk-off sentiment in financial markets, with Wall Street experiencing a retreat in stock prices.
China, the world’s leading crude importer, reported a 5.1% increase in imports during the first two months of 2024 compared to last year, reaching around 10.74 million barrels per day (bpd). Customs data revealed that refiners increased crude purchases to meet fuel demand during the Lunar New Year holiday. Meanwhile, China’s January-February refined product exports fell 30.6% year-on-year to 8.82 million tons, reducing supplies for global markets.
The upbeat trade data from China, the second-largest global economy, signals a potential turning point in global trade, offering encouragement to policymakers working to bolster a hesitant economic recovery.
Oil prices experienced a modest increase of about 1% the previous day, responding to U.S. Energy Information Administration (EIA) data showing the sixth consecutive weekly rise in crude inventories, albeit lower than analysts’ expectations. Crude inventories increased by 1.4 million barrels, two-thirds of the 2.1 million-barrel rise projected in a Reuters poll. Notably, gasoline and distillate stocks recorded larger-than-expected declines.
The outlook for oil prices is influenced by the anticipation of U.S. interest rate cuts, with a strong U.S. dollar expected to persist in the short term. A Reuters poll of foreign exchange strategists suggests that markets are bracing for the possibility of the U.S. Federal Reserve’s first interest rate cut being delayed to the second half of this year. Fed Chair Jerome Powell emphasized that while progress on inflation is uncertain, the central bank still anticipates reducing its benchmark interest rate later in the year.
