Crude oil prices and related exchange traded funds gained on Thursday as China prepared to stock up on supplies to meet rising consumption rates, and overall global demand is projected to return to pre-pandemic levels.
On Thursday, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, were up 0.5% and 0.6%, respectively. WTI crude oil futures were up 0.2% to $75.0 per barrel, and Brent crude was 0.2% lower to $78.5 per barrel.
Meanwhile, the ALPS Alerian MLP ETF (NYSEArca: AMLP) fell 0.8%, and the JPMorgan Alerian MLP Index ETN (NYSEArca: AMJ) declined 1.1%. The more widely observed Energy Select Sector SPDR Fund (NYSEArca: XLE) dropped 1.5%.
Chinese Premier Li Keqiang said that China, the world’s biggest crude importer and second-largest oil consumer, will maintain its energy and power supply and will keep economic operations within a reasonable range, Reuters reports.
“If China is happily paying any price for energy, this could intensify the energy crunch in Europe,” Edward Moya, senior market analyst at OANDA, told Reuters.
The update on China’s willingness to secure its energy supplies helped offset updated data on a rise in U.S. inventories. Government data on Wednesday revealed that U.S. oil and fuel stockpiles rose by 4.6 million barrels to 418.5 million barrels last week. Last week’s gains in U.S. crude oil inventories came as production off the Gulf Coast returned close to levels from right before Hurricane Ida forced many to shut down about a month ago.
Looking ahead, demand is expected to help maintain the elevated oil prices. Pointing to a faster fuel demand recovery and storm-led Gulf of Mexico supply disruptions, Goldman Sachs recently upwardly revised its year-end Brent forecast to $90 but warned of a potential new virus variant and a ramp-up in OPEC+ production as potential downside risks, Reuters reports.
“Demand growth will continue to support oil prices, balanced by the expected increase in OPEC+ production between now and the end-2021,” Ann-Louise Hittle, vice president of oils research at WoodMac, told Reuters.
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