One of the key factors driving the surge in WTI prices to one-week highs near $79.30 is the optimism surrounding rising demand in China. Data released on Thursday showed that China’s crude oil imports rose by 5.45% in April compared to the same month last year. This encouraging improvement in demand in the world’s largest crude-consuming nation has supported the upward momentum in WTI prices.
Another significant factor contributing to the gains in WTI prices is the ongoing geopolitical tensions and uncertainties in the Middle East. Israeli forces massed tanks and opened fire close to built-up areas of Rafah on Thursday, following President Joe Biden’s statement that the US would withhold weapons from Israel in the event of a major invasion of the southern Gaza city. These tensions are likely to raise concerns about oil supply disruptions, further boosting WTI prices.
Despite the positive factors supporting the surge in WTI prices, there are concerns that the stronger US dollar (USD) could cap the upside of the USD-denominated oil. The hawkish stance of the US Federal Reserve (Fed) has supported the strength of the USD. San Francisco Fed President Mary Daly highlighted the uncertainty over the inflation outlook on Thursday, emphasizing the challenges in making policy projections until more clarity is obtained.
The market reaction to the various factors influencing WTI prices has been swift and positive. WTI is currently trading around $79.30 on Friday, reaching one-week highs. The combination of rising demand in China, geopolitical tensions in the Middle East, and the impact of the stronger USD have all contributed to the upward momentum in WTI prices.
In the near term, it will be crucial to monitor developments in China’s demand for crude oil, the situation in the Middle East, and the Federal Reserve’s policy stance. Any shifts in these factors could have a significant impact on the direction of WTI prices moving forward. Traders and investors will need to remain vigilant and adapt to changing market dynamics to navigate the uncertainties in the energy market.