By Ambar Warrick
Investing.com -- Oil prices crept higher from 2021 lows on Thursday as an upbeat outlook on a Chinese economic recovery helped spur some hopes of a demand rebound this year, although markets remained on edge over a potential banking crisis.
Investment bank Goldman Sachs hiked its outlook for China’s annual economic growth to 6% from 5.5%, citing improving trends after the country relaxed most anti-COVID restrictions earlier this year.
The forecast, which is more than the 5% growth expected by the Chinese government, fed into expectations that a recovery in China will help drive crude demand to record highs this year.
Brent oil futures rose 0.2% to $73.86 a barrel, while West Texas Intermediate crude futures steadied at $67.74 a barrel by 23:07 ET (03:07 GMT). Both contracts plummeted around 11% this week, and were at their weakest levels since December 2021.
News that embattled Swiss lender Credit Suisse Group AG (SIX:CSGN) secured a $54 billion credit facility from the Swiss National Bank also helped ease some concerns over an imminent banking crisis.
But with the collapse of three U.S. banks over the past week, markets feared contagion in the broader economy. This in turn fed concerns that a potential recession will severely crimp oil demand this year.
Oil prices have plummeted so far this year amid growing concerns that a global recession will largely offset a recovery in Chinese demand. The Organization of Petroleum Exporting Countries also warned of such a scenario recently.
A recovery in the US Dollar Index, which rebounded from three-week lows in overnight trade, also added to pressure on oil prices, given that a strong dollar makes crude more expensive for international buyers.
Data showing that U.S. crude inventories grew more than expected in the week to March 10 pushed up concerns over slowing demand. U.S. inventories have now grown for 11 of the past 12 weeks, pushing up concerns over a potential supply glut in the world’s largest crude consumer.
While Goldman Sachs helped spur some optimism over China, mixed economic readings from the country over the past week presented a staggered recovery from COVID-era lows. Oil imports to the country also fell in the January-February period, despite the lifting of anti-COVID measures.
Crude markets are focused squarely on any new developments in the banking sector, with both U.S. and European governments racing to reassure investors over stability among major lenders.