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LONDON – Oil rose on Thursday as the prospect of higher demand from China and rising geopolitical risks outweighed recession fears after a flurry of central bank interest rate hikes, including the Bank of England.
Brent crude futures were up 70 cents, or 0.78%, at $90.53 a barrel at 1054 GMT, while U.S. West Texas Intermediate (WTI) crude was up 71 cents, or a 86%, to $83.65.
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Prices rose more than $1 earlier in the session on news that demand for crude in China, the world’s biggest oil importer, is recovering after being dampened by tight restrictions on the COVID-19.
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At least three Chinese state-owned oil refiners and one private mega-refinery are considering raising output by up to 10% in October from September, eyeing stronger demand and a possible rise in fourth-quarter fuel exports, people with knowledge of the matter said.
Meanwhile, Russia on Thursday pushed ahead with its biggest recruitment drive since World War II, raising concerns that an escalation of the war in Ukraine could further hurt supply.
“[Russian President Vladimir Putin’s] Frequent irrational actions and reactions are what will keep the market volatile and violent at times,” said Tamas Varga, oil analyst at London-based brokerage PVM Oil Associates.
Keeping a cap on prices, the Bank of England raised its key interest rate by 50 basis points to 2.25% and said it would continue to “respond strongly, as necessary” to inflation, despite the economy goes into recession.
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After the Federal Reserve’s sharp 75bp hike on Wednesday, rate hikes also came hard and fast from the Swiss National Bank, Norges Bank and Indonesia’s central bank, with further hikes expected from the Reserve Bank of South Africa later in the day.
“This just shows how synchronized this current tightening cycle is,” Deutsche Bank said.
The Fed also signaled on Wednesday that US borrowing costs will continue to rise this year, in a move that pushed Brent and WTI to near two-week lows.
More pressure followed the increase in stocks. U.S. crude inventories rose 1.1 million barrels in the week to Sept. 16 to 430.8 million barrels, missing analysts’ expectations in a Reuters poll for a 2.2 million barrels. (Reporting by Rowena Edwards in London Additional reporting by Muyu Xu in Singapore Editing by Mark Potter, Kirsten Donovan)
