By Peter Nurse
Investing.com — Oil prices climbed higher Tuesday, continuing the positive start to the week amid growing optimism about the recovery in Chinese demand as well as supply worries after an earthquake in Turkey.
By 09:35 ET (14:35 GMT), U.S. crude futures traded 1.1% higher at $74.94 a barrel, while the Brent contract rose 0.7% to $81.59 a barrel.
The market received a boost after Saudi Arabia unexpectedly raised its crude prices to Asia, signaling confidence in the demand outlook in the region, and particularly China, the world’s largest importer of crude.
“The market had been expecting that OSPs [official selling prices] would be cut for the month,” said analysts at ING, in a note. “Arab Light into Asia was increased by US$0.20/bbl to US$2/bbl over the benchmark, which is the first increase since September.”
This news follows the head of the International Energy Agency, Fatih Birol, stating over the weekend that there are some “first indications” from China that growth will accelerate quickly, seeing the Asian economic giant alone delivering around half of the forecast 2 million barrels a day increase in global oil demand this year.
Demand growth was also seen in Europe, with German crude oil import volumes rising 9.4% in the first 11 months of 2022 on a year-on-year basis as the economy recovered from the COVID-19 pandemic.
Turning to the supply side, Turkey has halted flows to its Ceyhan export terminal after a major earthquake.
“Pipeline infrastructure which carries both Iraqi and Azerbaijani crude oil to the Ceyhan terminal in Turkey passes through the region hit by the earthquake,” ING said. “Exports of Azerbaijani and Iraqi crude oil via the Ceyhan oil terminal have been in the region of 1MMbbls/d. It is not clear when the terminal will resume operations.“
A speech by Federal Reserve chair Jerome Powell later in the session will be carefully watched as indications of further Fed hikes could impact the dollar, potentially making crude more expensive for foreign buyers.
Additionally, the Energy Information Administration is also scheduled to issue its short-term energy outlook later in the session, while the American Petroleum Institute is set to reveal its weekly estimate of U.S. crude inventories.
In corporate news, BP reported a record profit of $28 billion for 2022, boosted by high energy prices, and decided to increase its dividend and its share buyback plans.