Oil prices rose early Tuesday, after Monday declines, possibly helped by some positive news from China — but doubts remain as to whether that direction will hold.
West Texas Intermediate front-month prices rose 1.5 percent to $51.25 per barrel as of 8:45 a.m. EST, while Brent front-month prices rose 1.4 percent to $59.81 per barrel.
The increase comes after a 2.5 percent decline in the previous session, with Brent declining to $58.99 on Monday compared with a Friday closing at $60.48 per barrel. Brent regained levels above $60 per barrel last week after it had declined below that level since mid-December.
The market could be reacting to positive news out of China on Tuesday, James Hyerczyk, a senior analyst at FXEmpire.com, said in a report. This could help alleviate concerns that contributed to declines in the previous session, following the release of Chinese trade data that appeared to indicate an economic slowdown.
Hyerczyk cited that China’s National Development and Reform Commission said ahead of the Tuesday session that it would aim to help achieve a good start for the economy in the first quarter, “lifting hopes of further economic stimulus.”
The Chinese government is also said to be seeking conditions to assure it meets its economic goals for this year, which also may be contributing to the early Tuesday increase, Hyerczyk said.
The Chinese economy is closely followed by oil traders because China is the world’s biggest crude oil importer.
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Rising supply, however, in part with the United States reaching a record output at 11.7 million barrels per day late last year, will continue to add bearishness to crude oil prices, he said.
“The price recovery may be somewhat short-lived, given that the economic outlook remains weak,” DailyFX analyst Justin McQueen told UPI. A weak economy has led to concern that crude oil demand may lag, he added.
“Alongside this, while OPEC-led cuts provide an undercurrent of support, demand for OPEC crude is expected to be lower than the estimated output,” McQueen said.
OPEC agreed on Dec. 7 to cut alongside Russia a total 1.2 million barrels of crude oil exports per day, in a bid to help prices rise.
The impact of that decision appears to have had a limited impact. On Dec. 7, Brent crude futures traded at $61.67 per barrel.
“Futures look interestingly poised today. On the one hand, funds seem to be going with the expectation that supplies will be short. The fear of growth slowdown, however, is very real and one would need to be extremely wary of the same,” Sukrit Vijayakar, analyst at Trifecta consultants, told UPI.