Oil prices rise amid signs of tightening demand

Futures were also supported by the closure of a major oil export terminal in Turkey

Traders at the New York Stock Exchange. Analysts expect the price cap on Russian refined product exports to have a bigger impact on global crude flows than the price cap on its crude. Getty

Oil prices rose in morning trade on Tuesday amid signs that China’s economic recovery is boosting crude demand.

Brent, the benchmark for two thirds of the world’s oil, was 1.84 per cent higher at $82.48 a barrel at 2.59pm UAE time while West Texas Intermediate, the gauge that tracks US crude, was up 2.04 per cent at $75.62 a barrel.

“Crude prices rose on an improving demand outlook and as this two-week slump appears to be overdone,” said Edward Moya, a senior market analyst at Oanda.

Oil prices fell by about 8 per cent last week after interest rate increases by global central banks and a large build-up in US crude stocks.

Naeem Aslam, chief market analyst at AvaTrade said the powerful earthquake in Turkey was “a major focal point among investors and traders as the natural disaster has threatened the supply equation [with] the shutdown of a major export terminal in the country”.

“Traders are also optimistic about demand in China as economic data suggests that the second-biggest economy of the world is on the right [track] and there are few concerns over an economic slowdown.”

China’s January reopening has triggered a surge in airline bookings, boosting demand for jet fuel.

Global jet fuel consumption — still about 2 million barrels per day below pre-Covid levels — will significantly recover in the second half of the year on higher Asian demand, Japanese bank MUFG said in a report last week.

Meanwhile, Saudi Aramco, the world’s largest oil exporter, has raised the official selling price of its crude to Asian markets in a sign of tightening demand in the region.

The company also increased its prices for the US and Europe, indicating that “demand may not be falling off as much as had been feared”, said Daniel Richards, Mena economist at Emirates NBD.

Exports from a 1 million bpd oil terminal in Turkey’s Ceyhan were halted after the quake hit the country on Monday.

The BTC terminal, which exports Azeri crude oil to international markets, will be closed until February 8.

Analysts expect the new price cap on Russian refined product exports to have a bigger impact on global crude flows than the price ceiling set on its oil.

This week, the Group of Seven advanced economies and the EU agreed to set the price cap at $100 a barrel for products that trade at a premium to crude, such as diesel, and $45 a barrel for products that trade at a discount, such as naphtha and fuel oil.

The price cap comes along with an EU ban on Russian diesel and other refined products.

Diesel is the backbone of global economic activity and markets were already in a deficit before Russia’s invasion of Ukraine began in February last year.