WTI holds on $80s as focus shifts away from China onto America

WTI reversed some of its earlier losses and is now up for a fifth straight day as it approaches the $80s region. In the last three weeks, it achieved the highest closing price in the futures markets. Despite expectations for a slightly less robust recovery in China’s economy, the bulls on Wall Street have reclaimed control of the black gold late in the day. American crude oil is currently trading at $80.59 a barrel compared to its previous closing price of $79.68 at the time of writing.

China decided on a 5% growth target for 2023 at the National People’s Congress. That fell short of forecasts and indicates that China will not provide significant stimulus this year, preferring to focus on long-term sustainability of GDP instead.

While excessive refinery maintenance is probably a factor in the rise in oil inventories in the near future, it is also keeping product markets tightly regulated during the season, providing support to the market.

The G7 oil price cap is beginning to lengthen the purchasing process and could affect purchases from India. India has previously been a significant purchaser of Russian barrels. Thus, oil markets could be set up for a big short-covering regime on the horizon if Russian production starts to tighten at a time when the market is more positive about the probability of Chinese demand returning.

On Friday, the US jobs market will release its most important statistics of the week in the form of US Nonfarm Payrolls. The impacts of the warm weather and significant seasonal adjustments in January are expected to wane, with growth anticipated to moderate to 220k. Overall, leading data point to continued tightness in the labour market despite improving growth expectations.

Following the Fed Chair Powell’s speech, which may express hawkish sentiments and a retreat from the more cautious policy framework for raising interest rates, this data will be released. Recent gains in non-farm payrolls and retail sales show that the Fed may have been caught off guard by a soft patch in the Q4 data and that the Fed’s upcoming policy will be led by latest softer data in the United States.