“Saudi Arabia Reaps Profits as Oil Prices Surge on Growing Asian Demand”
(Bloomberg) – Oil rose for a second session after Saudi Arabia unexpectedly raised its Asian crude prices, signaling confidence in the demand outlook.
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West Texas Intermediate futures climbed towards $75 a barrel after closing 1% higher on Monday. Saudi Aramco hiked most of its prices for crude oil, which will be shipped to its main market in Asia in March, amid growing optimism about a robust recovery in demand in China following the end of Covid Zero.
Supply disruptions also contributed to bullish tailwinds for oil. Turkey halted supplies to the Ceyhan export terminal after a major earthquake, while production at Norway’s giant Johan Sverdrup field was lower due to a power cut.
Oil has endured a choppy start to the year, clouded by optimism over China’s reopening and fears over the prospect of a global economic slowdown. The market is also assessing the potential impact of new European Union sanctions on Russian refined products and how this will affect trade flows.
“The market has been a bit hesitant about the return of China,” said Vandana Hari, founder of Vanda Insights in Singapore, during an interview with Bloomberg Television. “The biggest challenge for the market right now is how fast the economy will come back and how smoothly it will go.”
The Brent futures curve still signals tight short-term supply despite defaults in Turkey and Norway. The prompt spread – the difference between the two closest contracts – was 33 cents a barrel in backwardation.
Investors will be on the lookout for comment on the US monetary policy outlook from Federal Reserve Chair Jerome Powell when he is interviewed later Tuesday at the Economic Club of Washington.
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–Assisted by Menaka Doshi.
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