Crude oil prices could end this week with a more moderate decline than expected at the start of the week, as optimism about Chinese demand reignited towards the end of the trading period, pushing prices higher earlier today.
The increase, by more than 1 percent in pre-noon Asian trade today, followed the first trading session that ended with gains for the benchmarks this year, after two consecutive days of losses.
The latest U.S. oil inventory report contributed to the price rise as the increase in inventories was more modest than analysts had expected, at 1.7 million barrels. That build followed a weekly draw of 5.9 million barrels.
"It's been a few decades since oil had this bad of a start [to a new year] and energy traders jumped all over the news that the Colonial Pipeline had to halt operations after a leak occurred," said OANDA's Edward Moya, as quoted by MarketWatch.
The Line 3 news comes just weeks after another oil pipeline had to be shut down because of a leak: TC Energy's Keystone. It also comes amid news that fuel inventories in the United States are lower than average after the latest Arctic blast.
"The oil market is looking better supplied in the near term and risks are likely skewed to the downside. However, our oil balance starts to show a tightening in the market from the second quarter through to the end of the year, which suggests that we should see stronger prices from 2Q23 onwards," said ING commodity analysts quoted by MarketWatch.
Despite all these bullish developments, oil will almost certainly end the week with a loss because of the persistent and quite well-founded concern about the global economy's immediate future.
Fear of recession remains strong, especially after the head of the International Monetary Fund said she expected a third of the world's economies to slip into negative growth this year. And it is strong enough to keep a lid on oil prices for now.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More