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Futures Movers: Oil pushes higher as traders monitor China reopening, interest rates

Oil futures find support as investors continue to monitor China's reopening and look for more clues to the size and speed of Fed rate hikes Read More...

Oil futures rose Tuesday, finding support as investors continue to monitor China’s reopening and look for more clues to the size and speed of Fed rate hikes.

Price action
  • West Texas Intermediate crude for February delivery CL.1, +0.76% CL00, +0.76% CLG23, +0.76% rose 48 cents, or 0.6%, at $75.11 a barrel on the New York Mercantile Exchange.
  • March Brent crude BRN00, +0.60% BRNH23, +0.60%, the global benchmark, rose 41 cents, or 0.5%, to $80.06 a barrel on ICE Futures Europe.
  • Back on Nymex, March gasoline RBH23, +1.58% rose 1.3% to $2.323 a gallon, while March heating oil HOH23, +0.76% was little changed at $2.952 a gallon.
  • February natural gas NGG23, -6.78% dropped 2.8% to $3.799 per million British thermal units.
Market drivers

Crude continues to find support on expectations for higher demand out of China as the country scraps its COVID-19 restrictions. China’s longstanding COVID curbs had been seen as a weight on energy demand. Optimism around the lifting of curbs was dented last month as infections in the country surged.

“We are confident that oil prices will climb again once the current wave of COVID infections has peaked in China and economic activity picks up,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.

Travel activity around the Lunar New Year holiday, which takes place between Jan. 21 and 27, is expected to surge compared with the same period last year, with the main travel period generally 40 days around public holidays, Fritsch noted, with a Chinese official having estimated travel will reach around 70% of the 2019 level.

China has also opened its borders to international travelers again, which should go hand in hand with a recovery in oil demand, Fritsch said.

Concerns about the global economic outlook as the Federal Reserve and other major central banks continue to tighten monetary policy in their effort to bring down inflation have also been cited as a weight on crude prices. But recession fears don’t appear to be a major factor holding crude back, argued Stephen Innes, managing partner at SPI Asset Management, in a note.

“The current global activity data from trains, planes and automobile perspective is too strong to impact oil prices negatively from a recession sentiment perspective,” he said. “The warmer European weather likely obscures the more pronounced positive shift from China’s borders reopening. The unseasonable warm spell affects not just Europe but also the U.S. January warmth is set to have twice the impact of the December cold spell depressing demand for all winter fuels significantly lower.”

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