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Continued volatility has seen oil prices gain 1% on Wednesday, as the market attempts to decipher the latest demand growth, US crude inventory data, inflation indications and the impact of China’s COVID lockdowns.
As of 3:33 p.m. EST on Wednesday, Brent crude was trading up $0.53, at $93.73, for a 0.60% gain on the day. WTI was trading up $0.83, at $88.14, for a 0.95% gain on the day.
Oil prices appear to be reacting, in part, to Wednesday’s release by the Bureau of Labor Statistics of the Producer Price Index (PPI), which injected some optimism into markets that inflation may not become entrenched.
The PPI showed a drop in producer prices that signaled some supply chain issues might be easing.
Also lending upward buoyancy to WTI prices is the Energy Information Administration's (EIA) inventory report showing a build of 2.4 million barrels for the week to September 9, compared to an 8.8-million build for the previous week.
On Tuesday, high U.S. inflation data and a general consensus that there will be another Fed rate hike next week put downward pressure on oil prices.
Yet, the previous week, supply concerns and OPEC’s expectations of a 3.1-million-bpd jump in global oil demand had lifted prices higher.
China demand continues to act as a counterbalance to any sustained upward movement, though the IEA has only marginally trimmed global oil demand growth to 2 million bpd, from 2.1 million bpd forecasted in August. In fact, the IEA has contributed to a rebound with its forecasts that increased gas-to-oil switching will help demand this winter.
On Tuesday, in a note to clients carried by MarketWatch, Fairlead Strategies’ Katie Stockton suggested that oil prices could rebound, confirming a “short-term counter-trend ‘buy’ signal” for WTI crude oil futures.
"The rebound follows a breach of long-term support that suggests a long-term trading range has taken hold with support near $85 per barrel and minor resistance at the 50-day moving average," Stockton said.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com