Oil rose on Thursday, extending a rally of nearly 3% in the previous session, as optimism over record U.S. crude exports and signs that recession fears are abating outweighed concern over slack demand in China.
Figures on Wednesday showed record US crude exports, a hopeful sign for demand, even as crude stocks rose. The US dollar weakened in early trade on hopes that interest-rate hikes may become less aggressive.
“It appears that recession concerns have abated lately but continuously betting on healthy economic growth will prove foolhardy,” said Tamas Varga, an analyst at oil broker PVM.
Brent crude rose 56 cents, or 0.6%, to US$96.25 a barrel by 1057 GMT. U.S. West Texas Intermediate (WTI) crude gained 41 cents, or 0.5%, to US$88.32.
Worries about Chinese demand limited the rally. Global investors dumped Chinese assets early this week on fears about growth, with the economy beset by a zero-COVID policy, a property crisis and falling market confidence. China is the world’s biggest energy consumer.
“Concerns that China’s muddled economic policies may continue under President Xi Jinping’s growing power weighed on sentiment,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities
Although the dollar reversed early losses that saw it touch a one-month low, it remained pinned near October’s trough. Hopes that the U.S. Federal Reserve will shift to less aggressive interest rate increases have been weighing on the U.S. currency.
A weaker dollar makes oil cheaper for holders of other currencies and tends to reflect greater investor appetite for risk assets.
Crude has slumped on economic concerns after surging earlier this year after Russia invaded Ukraine, with Brent coming close to its all-time high of $147 in March.
U.S. and Western officials are finalising plans to impose a cap on Russian oil prices amid a warning from the World Bank that any plan will need active participation of emerging market economies to be effective.