Oil regained its footing as investors wagered China’s demand revival would sustain the market, shrugging off an expected rise in US domestic stockpiles.

West Texas Intermediate rose as much as 2.1 per cent to above US$81 a barrel in a volatile session on Thursday. JPMorgan raised its estimate for China’s oil demand growth, with consumption on track to reach a record high of 16 million barrels a day. However, lingering economic growth fears in the U.S. continued to spook Wall Street, prompting some traders to shy away from risky assets.

“The macro picture is creating a lot of friction to the rally in crude and it will be hard for the commodity to continue to outperform in the near term until we see concrete evidence that demand is China is accelerating or macro headwinds cool down,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Management.

Crude has endured a bumpy start to the year, collapsing 10 per cent in the first two sessions only to rebound as China’s reopening dominates the trading narrative. The demand outlook remains the market’s swing factor with industrialized economies looking for a soft landing as interest rates rise and China emerges from COVID curbs.

Prices:

• WTI for February delivery rose US$1.50 to US$80.98 a barrel at 12:41 p.m. in New York.
• Brent for March settlement rose US$1.65 to US$86.63 a barrel.

“The reopening is proceeding sooner (by one quarter) and more rapidly than we originally expected,” JPMorgan analysts, including Natasha Kaneva, wrote in a note to clients. “This opens a possibility that China is poised for a strong economic recovery that will gather steam in February, after the end of the Lunar New Year holiday.”

Traders largely ignored the biggest build in inventories at the Cushing storage hub since April 2020 since the increase was anticipated as a lingering consequence to a cold snap last month that shut down refineries.