The prices rose more than a dollar earlier in the session on news that demand for crude in China, the world’s largest oil importer, is picking up, having been dampened by tight COVID-19 restrictions.
At least three Chinese state-owned oil refineries and a private mega-refinery are studying the possibility of increasing their production by as much as 10% in October from September, with a view to higher demand and a possible rise in fuel exports in the fourth quarter, people with knowledge of the matter said.
In the meantime, Russia went ahead Thursday with its call up of 300,000 reservists and raised concerns about an escalation of the war in Ukraine which could further damage supply. “The frequent irrational actions and reactions (of the Russian president Vladimir Putin) are the ones that will keep the market volatile and violent at times,” said Tamas Vargaan oil analyst at the London brokerage PVM Oil Associates in dialogue with Reuters.
The advance in prices was limited after the Bank of England raised its interest rate by 50 basis points, to 2.25%, and said it will continue to “respond strongly, as necessary” to inflation, despite the fact that the economy is entering a recession.
After the sharp rise in 75 basis points from the Federal Reserve on Wednesday, the Swiss National Bank, Norges Bank and the Central Bank of Indonesia Interest rates also rose, with a further hike from the South African Reserve Bank expected later in the day. The Bank of Japan it also entered the market for the first time since 1998.
The Federal Reserve also signaled on Wednesday that US borrowing costs would continue to rise this year, in a move that pushed Brent and WTI to near two-week lows. The pressure was higher after stock build. US crude inventories rose by 1.1 million barrels in the week to September 16, to 430.8 million barrels, below analysts’ expectations in a Reuters poll for a rise of 2 .2 million barrels.