On Thursday (March 2), West Texas Intermediate (WTI) crude futures closed higher, citing signs of a strong economic recovery in China, the world’s top crude importer.
- WTI crude futures rose 47 cents, or 0.6%, to settle at $78.16 a barrel.
- Brent crude futures rose 44 cents, or 0.52%, to settle at $84.75 a barrel.
WTI crude futures closed in positive territory for the third day in a row as investors continued to welcome data that indicated a recovery in China’s economy. The country’s manufacturing purchasing managers’ index (PMI) in February rose to 52.6 from 50.1 in January, the fastest expansion in 11 years. Services for February rose to 56.3 from 54.4 in January. An index above 50 indicates an expansion in China’s manufacturing and service sectors, which is a sign that the Chinese economy is starting to recover after the government canceled measures to control COVID-19.
The recovery in Chinese demand for oil has boosted the market, with crude oil futures rising in response. However, the strengthening of the dollar has affected the market, as crude oil contracts, priced in dollars, become more expensive for investors holding other currencies.
In other news, markets were also buoyed by comments from Atlanta Fed President Rafael Bostic, who has urged the Fed to slow down its pace of rate hikes. He views raising interest rates by only 0.25% continuously as a reasonable move that will help mitigate the economic impact of the Fed’s aggressive rate hikes several times in the past.
Overall, the oil market has responded positively to the recovery in Chinese demand for oil and the Fed’s consideration of a slower rate hike. However, the strengthening of the dollar has tempered gains in the market. Investors will continue to watch these developments closely in the coming weeks.
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Friday, March 3, 2023