Oil prices steady after falling more than 2% on economic growth concerns

US crude stocks rose more than expected last week

Pump jacks in an oilfield in Midland, Texas. US crude oil stocks rose by about 3.4 million barrels last week. Reuters

Oil prices were steady on Wednesday, after falling more than 2 per cent in the previous session on concerns of a global economic slowdown and a large build-up in US crude stocks.

Brent, the benchmark for two thirds of the world’s oil, was 0.02 per cent lower at $86.11 a barrel at 2.42pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was up 0.04 per cent at $80.16 a barrel.

Brent closed 2.3 per cent lower at $2.06 on Wednesday, while WTI was down 1.8 per cent at $1.49 at session's end.

"Oil prices continue to remain interesting as bulls are still in town and continue to support the prices," said Naeem Aslam, chief market analyst at AvaTrade.

"Investors continue to bet on the most important factor — the Chinese demand and its recovery."

US crude oil stocks rose by about 3.4 million barrels last week, Emirates NBD analysts said, citing data from the American Petroleum Institute. Analysts were expecting a growth of 1 million barrels.

The indicator, which shows the level of oil and product stored, gives an overview of US petroleum demand. If the increase in crude inventories is more than expected, it implies weaker demand and is bearish for crude prices.

Futures also came under pressure from growing signs of a recession in the world’s largest economy.

The US Conference Board leading economic index, a basket of 10 indicators of economic activity, fell by 1 per cent in December, steeper than analysts' estimates of a 0.7 per cent drop.

The index is now down 4.2 per cent between June and December 2022.

Oil futures have gained for two straight weeks after China — the world’s second-largest economy and top crude importer — reopened its borders for the first time in three years, triggering a sharp rise in airline bookings.

China's economy, which grew 3 per cent in 2022, is set to improve and is highly likely to reach a normal growth rate in 2023, Vice Premier Liu He told the World Economic Forum in Davos last week.

Global oil demand will surge to a “record” this year, following the end of coronavirus restrictions in China, the International Energy Agency said in a report last week.

Oil demand will rise by 1.9 million barrels per day to 101.7 million bpd in 2023, said the IEA, which had previously estimated a growth of 1.7 million bpd.

“Two wild cards dominate the 2023 oil market outlook: Russia and China,” the Paris-based agency said.

“The well-supplied oil balance at the start of 2023 could quickly tighten, however, as western sanctions impact Russian exports.”

Meanwhile, Opec has stuck to its global oil demand forecast for this year, despite an improving economic outlook in China.

The group still expects oil demand to grow by 2.2 million bpd this year, which is lower than its estimate of 2.5 million bpd growth for 2022, it said last week.

Global growth is projected to decline to 1.7 per cent this year from the 3 per cent forecast six months ago, the World Bank said in its latest Global Economic Prospects report, released this month.

This is the third weakest pace of growth in about three decades, reflecting global monetary tightening, the effects of Russia's war in Ukraine, high inflation levels, worsening financial conditions and weaker growth in the US, China and the euro area.