Oil rose on March 2 on signs of a strong economic rebound in top crude importer China, but fears over the impact of potential increases to European interest rates kept prices from moving higher.
Brent crude futures were up 44 cents, or 0.5%, at $84.75 a barrel by 11:22 a.m. EST (1622 GMT). U.S. West Texas Intermediate (WTI) crude futures gained 57 cents, or 0.7%, at $78.26.
“The complex remains well supported largely off expectations for increased Chinese oil demand that would be driven by improvement in the Chinese economy now that all sectors have been reopened,” said Jim Ritterbusch of consultancy Ritterbusch and Associates.
Manufacturing activity in China grew last month at the fastest pace in more than a decade, data showed on Wednesday, adding to evidence of a rebound in the world’s second-largest economy after removal of strict COVID-19 curbs.
China’s seaborne imports of Russian oil are set to hit a record high this month as refiners take advantage of cheap prices.
However, the market was pressured by growing expectations of rate increases by the European Central Bank (ECB) after faster than expected acceleration in consumer prices in France, Spain and Germany.
“Resurfacing inflation worries contributed to the souring mood,” said PVM Oil analyst Tamas Varga. “Persistent inflation anxiety will act as a break on a prolonged rally in the immediate future.”
Euro zone inflation rose in February to a higher-than-expected annual rate of 8.5%, according to a first estimate from the EU’s statistics agency.
ECB minutes on Thursday suggested it may keep raising interest rates beyond the March meeting in two weeks, ING Economics said.
In the United States, a 10th consecutive week of crude stock builds also weighed on the market.
Record exports of U.S. crude, however, kept the build smaller than in recent weeks, the Energy Information Administration said.
Oil was also pressured by a strengthening dollar, after U.S. unemployment claims pointed to a strong jobs market. With other data showing growing labor costs, investors expect the Federal Reserve will keep interest rates higher for longer.
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