Oil prices buoyed by US growth

Oil prices rose for a second consecutive day on Friday, January 27th, due to stronger-than-expected economic growth in the United States and hopes for a rapid recovery in Chinese demand as COVID-19 cases and deaths decrease from last month’s peak. Brent futures increased by 30 cents, or 0.34%, to $87.77 per barrel, while US crude rose by 34 cents, or 0.42%, to $81.35 per barrel. Both benchmarks had gained over 1% on January 24th and 26th.

Next week, OPEC+ members will meet to review crude production levels, with steady support for crude prices from strong demand for jet fuel and diesel. Additionally, the US Federal Reserve will make a decision on another rate hike as inflation decreases and the gross domestic product improves.

Despite a 4.2 million barrel build in stocks at Cushing, the pricing hub for NYMEX oil futures, earlier this week, oil markets were boosted by broad optimism on the first day of the return of Chinese stock markets. As China’s economy continues to reopen, this is playing a significant role in boosting the demand outlook, according to Tina Teng, analyst at CMC Markets.

Critically ill COVID-19 cases in China have dropped by 72% from a peak early this month while daily deaths among COVID-19 patients in hospitals have dropped by 79% from their peak, indicating a normalization of the Chinese economy and increasing expectations of a recovery in oil demand.

An analyst noted, “The short-term bullish factor is that the recent outage in the US refineries helped push up gasoline prices, though the US crude inventories hit a 16-month high.”