By Ambar Warrick
Investing.com -- Oil prices rose on Wednesday as a drop to three-month lows attracted some bargain buying, while optimism over Chinese demand, following strong economic data and a hike in the OPEC’s outlook for the country, also aided sentiment.
But crude markets were still nursing steep losses this week, as fears of a potential banking crisis in the U.S. drove up concerns that a recession could crimp oil demand this year.
Brent oil futures rose 1.1% to $78.30 a barrel, while West Texas Intermediate crude futures rose 1.2% to $72.20 a barrel by 22:31 ET (02:31 GMT). Both contracts recovered from their lowest levels since early-December, also aided by continued weakness in the dollar.
The greenback sank against a basket of currencies as overall U.S. consumer inflation eased as expected in February. Ructions in the banking system also saw markets question whether the Fed will have enough economic headroom to remain hawkish.
Data on Wednesday showed that Chinese industrial production rose slightly less than expected in February. But strong retail sales and higher-than-expected fixed asset investment showed that certain facets of the economy were on a steady path towards recovery.
The Organization of Petroleum Exporting Countries (OPEC) raised its forecast for growth in Chinese oil demand this year, citing a relaxation in the country’s anti-COVID policies. The OPEC expects China to drive global oil demand to record highs this year.
But the cartel also warned that slowing growth in the rest of the globe could largely offset a recovery in China. Oil prices plummeted over the past two sessions as fears of a U.S. recession were exacerbated by the collapse of several regional banks.
Stronger-than-expected U.S. core consumer inflation for February pointed to more near-term pressure on the economy, and could also keep the Federal Reserve hawkish despite a potential banking crisis.
Concerns over rising interest rates and slowing economic growth have been the biggest headwinds to oil prices this year, with markets fearing a slowdown in demand as monetary conditions tighten and as major economies grapple with high inflation.
Signs of a potential build in U.S. oil inventories over the past week also presented potential headwinds to oil prices, as industry data showed U.S. crude inventories grew more than expected in the week to March 10. The reading usually heralds a similar trend in official data, which is expected to show a build of 1.18 million barrels later in the day.