The market remained steady this week finding some support from optimistic news surrounding China, the leading importer of crude oil, which is expected to drive higher energy demand on the back of increased manufacturing activity. Additionally, the recent movement in the US Dollar has introduced volatility into the oil market since Wednesday’s session. On Thursday, the US oil markets experienced a notable surge of around 3%.
Chinese data released on Thursday revealed a significant 15.4% increase in oil refinery throughput in May. This compares to the previous year, marking the second-highest level on record. Kuwait Petroleum Corp’s CEO expressed confidence in continued growth of Chinese oil demand throughout the second half of the year. This positive outlook from China reinforces expectations for rising demand.
Meanwhile, in the United States, retail sales unexpectedly rose in May, and jobless claims exceeded expectations last week. As a result, the US Dollar weakened, reaching a five-week low against a basket of other currencies. A weaker Dollar has the potential to increase demand for oil as it makes it more affordable for holders of other currencies.
Despite these positive factors, market sentiment continues to be is overshadowed by concerns about the global economic outlook. China’s industrial output and retail sales growth in May fell short of expectations, raising apprehensions about the strength of the economic recovery. Furthermore, the recent aggressive rate hikes and interest rate increase by the European Central Bank (ECB) to a 22-year high, along with indications from the US Federal Reserve of a potential half percentage point increase by year-end, add to the uncertain economic landscape.
Higher interest rates could translate to increased borrowing costs for consumers, potentially slowing down economic growth and reducing oil demand. Crude oil prices are grappling with finding solid support as they navigate through the vulnerabilities and potential shocks of the global growth outlook.
Fuel cards users can expect a small increase in the region of .27 pence per litre as we head into next week.
