LONDON—Oil prices rose on Tuesday, erasing the previous session’s losses, as Optimism for a solid economic rebound in China offset worries about further U.S. interest rate hikes dragging on consumption in the world’s biggest economy.
Brent crude futures for April, due to expire on Tuesday, were up by 87 cents, or 1.1 percent, to $83.32 per barrel by 1059 GMT. The more active May contract rose $1.09, or 1.3 percent, to $83.13 per barrel.
U.S. West Texas Intermediate (WTI) crude futures gained $1.18, or 1.6 percent, to $76.89 a barrel.
Expectations of demand recovery in China underpinned gains, with the market awaiting key data over the next two days. Economists polled by Reuters expected factory activity in the world’s second-largest economy grew in February.
“China’s economic recovery will drive its demand for commodities higher with oil positioned to benefit the most,” JPMorgan analysts said in a client note.
JPMorgan’s oil analysts maintained their 2023 average price forecast on Brent crude futures at $90 per barrel.
The threat of more U.S. rate increases following stronger-than-expected new orders for core U.S.–manufactured capital goods in January, capped gains though, with U.S. Federal Reserve Governor Philip Jefferson saying inflation for services remained “stubbornly high.”
The “voices of those expecting a 0.5 percent increase in interest rates next month by the Federal Reserve are getting louder,” PVM Oil analyst Tamas Varga said.
The market will be looking to the latest U.S. oil stocks data due from the American Petroleum Institute industry group on Tuesday and the government’s Energy Information Administration on Wednesday for further demand indicators.
A preliminary Reuters poll showed analysts expect crude stocks grew by 400,000 barrels in the week to Feb. 24, which would mark the tenth consecutive week of builds.
Seven analysts polled also estimated that gasoline stocks rose by about 700,000 barrels. Distillate inventories, which include diesel and heating oil, were expected to have decreased by about 500,000 barrels last week.
