Oil prices continued to climb on Friday morning after a substantial rise on Thursday, and will probably end with a weekly gain, albeit moderate, after two consecutive weeks of losses.
The Thursday price jump came on the back of news from China, where refinery throughputs rose by 15.4% in May confirming strong oil demand, and retail sales data from the United States, which showed sales had surprisingly increased in May.
"While overall Chinese activity data was disappointing, Chinese crude throughput in May jumped," Charu Chanana, market strategist for Singapore-based Saxo Capital Markets, told Bloomberg. "Stimulus hopes also continue to support sentiment."
China's central bank this week reduced interest rates, which was widely seen as a move aimed at accelerating the pace of recovery, which has recently faltered, based on economic indicators.
UBS Global Wealth Management forecast there will be more rate cuts later in the year as the Chinese government seeks to stimulate domestic consumption, according to a CNBC report.
Meanwhile, the European Central Bank raised rates once again, taking them to the highest in 22 years. Bank chief Christine Lagarde also signaled there were more hikes down the road after the ECB failed to recognize the signs of a looming recession earlier.
"Crude prices are trying to find support as the global growth outlook remains vulnerable to further shocks from aggressive rate hiking campaigns," OANDA analyst Edward Moya told Reuters.
Higher interest rates raise borrowing costs and generally discourage oil demand growth. Even though Europe is not exactly an oil demand powerhouse, it still consumes a substantial amount of the commodity, so expected changes in demand would affect oil prices globally.
On the flip side, the U.S. dollar slid down, potentially improving the outlook for oil demand as a cheaper dollar makes for cheaper oil to buyers in non-dollar currencies.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com:
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Russia Discovers Massive Oil and Gas Reserves in British Antarctic Territory
Five Countries With the Cleanest Energy Grid Globally
Aramco’s Q1 2024 Results: Saudi Arabia is at a Dangerous Tipping Point
U.S. Leverages Saudi-Israeli Relations to Isolate Iran
Russia Targets Kharkiv in Major Offensive After Kyiv Attacks Refineries