Oil prices up 1% to near 7-week high on China recovery hopes

 

Analysts expect a drawdown in US crude stocks of about 1.8 million barrels in the week to Jan. 13, a Reuters poll showed, providing further price support.


The poll was conducted ahead of reports from the American Petroleum Institute (API) at 4:30 p.m. EST (2130 GMT) on Wednesday.


A report showing US retail sales fell more than expected in December provided some counterintuitive support for oil prices.


That's because the broad drop in sales, together with subsiding inflation, are likely to encourage the US Federal Reserve (Fed) to further scale back the pace of its interest rate increases next month.


The Fed uses higher interest rates to reduce inflation. But those higher rates also make it more expensive for businesses and consumers to borrow money, slowing economic growth.


The weak US economic data also caused the dollar to drop to its lowest since June against a basket of other currencies.


A weaker dollar can boost demand for oil, as dollar-denominated commodities become cheaper for holders of other currencies.


In other parts of the world, Germany is expected to narrowly avoid recession this year and Japan is nearing the phase where its monetary policy easing can be stopped, but Taiwan's trade-dependent economy unexpectedly contracted in the fourth quarter.

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