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Oil up, treading water as Europe's drone over rate hikes drowns China story 

Published 03/02/2023, 02:36 PM
Updated 03/02/2023, 02:47 PM
© Reuters.

By Barani Krishnan

Investing.com -- The ECB seems to be doing as good a job with hawkish talk as the Fed. And that’s impacting markets of all types, including oil.

Crude prices treaded water for more than half of Thursday, shuttling between negative and positive, after rallying nearly $1 a dollar early into the U.S. session. The settlement was still higher, marking a third straight day of gains. 

New York-traded West Texas Intermediate settled at $78.16  a barrel, up 47 cents, or 0.6%. The U.S. crude benchmark has gained 3.3% over three sessions. 

London-traded Brent crude settled at $84.75, up 44 cents or 0.5%. The global crude benchmark has accumulated 2.7% since its last negative close on Monday.

Thursday’s mid-session drift came as new data out of the eurozone suggested that inflation is taking a while to come down significantly, raising prospects of further rate hikes in the region in the coming months.

Headline inflation across the 20-member bloc came in at 8.5% in February, according to preliminary data released Thursday. This indicates that prices are not coming down at the pace that had been registered in recent months. Headline inflation stood as high as 10.6% in October, but reached a revised 8.6% in January.

The ECB has already flagged a half-percentage-point rate hike on March 16. Markets are also pricing in another 50-basis-point hike on May 4, and the accounts of the ECB's February meeting, published on Thursday, did little to challenge those bets.

"We have every reason to believe that there will be another 50-basis-point increase at our next meeting in March," ECB President Christine Lagarde said Thursday. "I don't have any reason to believe that it won't be like that."

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The tough ECB stance offset the positive impact from Wednesday’s weekly update on oil supply-demand from the U.S. government that showed record crude exports last week.

It also took some shine off the upbeat factory data released by China in the previous session and Thursday’s Reuters report that the Chinese seaborne imports of Russian oil were set to hit a record this month after refiners took advantage of cheap prices as domestic fuel demand rebounded. 

Tanker tracking consultancies Vortexa and Kpler estimated nearly 43 million barrels of Russian crude oil, comprising about at least 20M barrels of ESPO Blend and 11M barrels of Urals, are set to reach China in March, the Reuters report said. 

The previous high for Russian seaborne crude imports was 42.48M barrels in June 2020, ship-tracking data showed.

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