Oil prices edged higher on Wednesday as investors’ risk appetite returned amid optimism in the broader stock markets and indications of an improved demand outlook from China.
December contract Brent crude futures gained 0.6% to $90.58 per barrel, while the US West Texas Intermediate (WTI) for December settlement rose 1.1% to $82.97 per barrel.
The increases came after the two oil benchmarks posted in the previous session losses of 1.7% and 3.1%, respectively, hitting a two-week low on news of US President Joe Biden’s plans to release 15 million barrels from the Strategic Petroleum Reserve (SPR).
Lead energy analyst Suvro Sarkar said the slight recovery in oil prices is more likely due to more positive sentiment on the stock markets and an increased appetite for riskier assets than industry fundamentals.
Oil Prices Likely to Remain Strong
Pushing prices further up was a potential for fuel demand recovery in major importer China, with private mega-refiner Zhejiang Petrochemical Corp. (ZPC) being awarded another 10 million tons of crude oil import quota this year.
Meanwhile, state-run China National Chemical Corp. Ltd. (ChemChina) received an additional quota of 4.28 million tons for the rest of 2022. That brings the total to around 104 million barrels.
Contributing to oil prices’ strength were also the upcoming European Union (EU) embargo on Russian oil and the Organization of the Petroleum Exporting Countries’ (OPEC) production cut of 2 million barrels per day (bpd).
The output cut from the OPEC and allies (OPEC+) and the bloc’s sanctions on Russian crude and oil products are expected to tighten supply in an already restrained market. The EU ban on Russian oil is set to start in December and February, respectively.
Still, according to Sarkar, market players would remain overall bullish than bearish on oil at current levels, despite the bloc’s embargo on Russian crude oil.
Furthermore, a senior administration official stated that Biden would announce later in the day plans to sell the rest of his release from the SPR and present a restock plan should prices decline.
