Oil Prices Inch Up on China Demand and Ukraine Escalation

Crude oil prices ticked higher on Wednesday on signs that Chinese demand was picking up and the latest escalation between Russia and Ukraine.

Brent crude was trading at $73.25 per barrel at the time of writing, with West Texas Intermediate at $69.39 per barrel. Both have added over $2 per barrel since last Friday after Ukraine shot ATACMS missiles at targets in Russia following the Biden administration’s U-turn on using the weapons for striking Russian territory.

“This marks a renewed build up in tensions in the Russia-Ukraine war and brings back into focus the risk of supply disruptions in the oil market,” ANZ analysts said in a note, as quoted by Reuters.

Meanwhile, signs are emerging that crude oil demand in China may be on the rebound, Reuters reported, citing Kpler data about Chinese imports. The data suggests that oil imports into China this month could be close to or at record highs—despite repeated reports that Chinese oil demand growth is on life support.

The Kpler data follows a report about China’s oil inventories saying the country’s oil surplus shrank in October, to 550,000 bpd from 930,000 bpd in September. In that report, Reuters’ Clyde Russell said the surplus shrinkage should not be taken as a bullish sign for oil prices, interpreting the numbers as evidence that China was importing more crude that it needed immediately.

Meanwhile, it has emerged that the International Energy Agency’s projections for global oil inventory movements in the final quarter of the year may have been overly modest. Preliminary data cited by Bloomberg—and coming from the IEA—shows that global oil stocks shrank by some 1.16 million bpd this quarter. The projected decline was 380,000 bpd.

On the bearish side, Norway’s Johan Sverdrup field returned to production after a short suspension due to a power outage, and the American Petroleum Institute estimated a crude oil inventory build of 4.75 million barrels for the week to November 8.