Oil rally falters as growing stockpiles outweigh China demand

Oil prices fell slightly on Monday (Jan 23) as rising stockpiles in the US outweighed optimism that Chinese New Year festivities in China boosted demand. 

West Texas Intermediate (WTI) dipped US$0.02 to US$81.62 a barrel on Monday, marking only the second time oil prices have dropped in the last 12 trading sessions. 

WTI’s prompt spread sold off after a build in inventories at Cushing, Oklahoma. Stockpiles at the delivery point for benchmark US crude futures rose by about 1.6 million barrels from Jan 13-17, according to traders, who cited data from Wood Mackenzie.

Oil has shaken off a weak start to 2023 as the end of China’s Covid-Zero policies have spurred the world’s largest oil importer to boost its import quotas and prompted analysts to raise their projections for demand. Expectations that the Federal Reserve is close to ending its series of aggressive rate hikes also have buoyed prices.

Several measures of technical strength have bolstered crude markets as well. Brent futures crossed above their 100-day moving average for the first time since November, which could spur more buyers to enter the market. Meanwhile, net bullish bets on Brent futures surged to a two-month high last week. 

Russia’s seaborne crude exports dropped last week, contributing to the smallest inflow into the country’s coffers since Moscow sent its forces into Ukraine. Moscow is set to publish a decree detailing a ban on Russian firms selling oil to clients adhering to a price cap, Kommersant said. 

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Further restrictions on Russian energy flows are due to kick in early next month as the war in Ukraine grinds on. US Treasury Secretary Janet Yellen expressed confidence at the weekend that curbs on Russian crude sales can be expanded to refined products. BLOOMBERG