Crude oil edged up on Wednesday as optimism for demand recovery in China and a likely unchanged output cut decision by major oil producers offset global recession worries.
Brent crude rose 22 cents, or 0.3%, to $86.35 per barrel by 0501 GMT after falling 2.3% in the prior session. U.S. West Texas Intermediate (WTI) crude climbed 13 cents, or 0.2%, to $80.26 per barrel, after a 1.8% drop on Tuesday.
“Expectations that China’s fuel demand will recover in the second half of the year are growing and are likely to support the market sentiment,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
Analysts from the Bank of America Securities said the reopening of the Chinese economy could unleash a large wave of pent-up demand over the next 18 months.
On the supply side, volumes should remain steady for the medium term as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, is expected to keep their output quotas.
An OPEC+ panel is likely to endorse the producer group’s current oil output policy when it meets next week, five OPEC+ sources said on Tuesday, as the hopes for higher Chinese demand are balanced by worries over inflation and the global economy.
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OPEC+ in October decided to trim output by 2 million barrels per day from November through 2023 on a weaker economic outlook.
However, gains in oil prices were capped by a bigger-than-expected build in U.S. oil inventories that was reported after the market settled on Tuesday.
U.S. crude stocks rose by about 3.4 million barrels in the week ended Jan. 20, according to market sources citing American Petroleum Institute figures. That was triple the forecast for an about 1 million build in a preliminary Reuters poll on Monday.
