Oil prices are rising as confidence in the global economic recovery increases

ive here. Well, if you read our previous posts about sentiment in Davos, you’ll notice that the Financial Times decided to hard-whip an IMF economic upgrade as evidence of animal spirits rising among the super-rich. The Wall Street Journal, which actually spoke to the audience, was more pessimistic.

However, speculators are taking on the IMF/FT’s optimistic spin… even though the World Bank has just cut its 2023 forecast to just over the pace of the economic recession.

In fairness, a related oil price story asserts that the Saudis are also bullish on oil prices based on the signals they are getting from China. Keep in mind, we’ve said that China’s recovery is going to have a huge impact on oil prices and growth in general. Your humble blogger is cutting out upbeat talk from China for the time being. The Xi government has to portray its sudden shift to Zero Covid as a major success for it to actually succeed or it cannot be denied that it was a belly-flip, or worse.

By Tsvetana Paraskova, a writer for Oilprice.com with over ten years of experience writing for news outlets such as iNVEZZ and SeeNews. Originally published in OilPrice

  • Oil prices extended their rally Tuesday into early Wednesday morning, jumping more than 1% in early European trade.
  • Bullish sentiment is building as forecasts from the Organization of the Petroleum Exporting Countries (OPEC) and the World Economic Summit suggest that major economies may avoid a recession.
  • While oil prices are rising, analysts warn that the rally could soon face significant technical resistance.

Oil prices extended Tuesday’s gains into Wednesday, rising 1% in early European trade, as market sentiment turned bullish on hopes that China’s reopening will boost demand growth and major advanced economies may avoid recessions.

US WTI was up 0.95% at $81.00 as of 9:05 CET. Brent crude, the international benchmark, rose 0.76% to $86.60, building on Tuesday’s gains, which saw Brent’s strongest settlement since early December.

On Tuesday, OPEC Secretary-General Haitham Al-Ghais said that signs of cautious optimism about the recovery of economies and oil demand began to emerge, thanks to the Chinese reopening. The latest GDP data from China, while pointing to the lowest rate of economic growth since the 1970s, beat expectations.

“The good outweighs the bad with forecasts for China’s economic future. The latest set of economic data points in China provides ample optimism that its reopening momentum could impress throughout the year,” Ed Moya, senior market analyst, Americas, said at OANDA on Tuesday.

However, Moya warned, “The reopening optimism in China that has sent oil prices higher may be a bit more intense, but should stop soon. Energy traders are likely to be a few dollars away from massive technical resistance.”

Much of the recent optimism was fueled by headlines from the World Economic Forum in Davos. OPEC’s monthly Oil Market Outlook report released on Tuesday suspended support by keeping its 2023 global demand growth forecast unchanged from December.

Gita Gopinath, Senior Deputy Managing Director of the International Monetary Fund, indicated that the fund may raise its forecast for economic growth soon. Gopinath said that global growth will improve in the second half of this year and into 2024 Message from Davos.

Assuming that OPEC+ production remains at levels similar to those recorded in December, OPEC numbers in its latest monthly report on Tuesday suggest the global market is balancing into a small surplus during the first half of 2023, ING said.

“But the group sees a tighter market during the second half of 2023 if OPEC’s production policy remains unchanged,” Warren Patterson and Ewa Manthe, strategists at ING, said on Wednesday.

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *