Oil prices rose on Tuesday as a higher global economic growth forecast and escalating tensions in the Middle East offset concerns around Chinese demand.
March Brent crude futures, which expire on Wednesday, rose 47 cents to settle at $82.87 a barrel. The more active April contract settled up 67 cents at $82.50.
U.S. West Texas Intermediate crude settled up $1.04, or 1.35%, at $77.82.
The International Monetary Fund raised its forecast for global economic growth, upgrading the outlook for both the U.S. and China on faster-than-expected easing of inflation.
On Monday, both crude contracts fell by more than $1 as a deepening real estate crisis in China fuelled concerns over demand in the world’s biggest crude consumer, with a Hong Kong court ordering the liquidation of property company China Evergrande Group.
“There’s still concerns about what we’ve seen in China, but the fundamentals, from a supply risk standpoint, are still very bullish,” said Phil Flynn, analyst with Price Futures Group.
Continuing conflict in the Middle East also provided support to the market.
U.S. President Joe Biden said he has made up his mind on how to respond to a drone attack as he weighs punishing Iran-backed militias without triggering a wider war.
“[The] latest upticks might be driven by some market participants adding some positions now that US President Biden has decided how to react,” said Giovanni Staunovo, analyst at UBS.
On the supply side, the U.S. began reimposing sanctions on Venezuela this week after the country’s top court upheld a ban blocking the candidacy of the leading opposition hopeful in a presidential election later this year.
Saudi Aramco said it had received a directive from the Saudi energy ministry to maintain its maximum sustainable capacity at 12 million bpd and not to continue increasing it to 13 million bpd.
Saudi Arabia is the world’s biggest oil exporter.
“While we remain hesitant to speculate on motivations for this decision, within it, we see potential acknowledgment of a firmer global supply picture than has been broadly appreciated,” Walt Chancellor, an energy strategist at Macquarie, said in a note.
An OPEC+ meeting on Feb. 1 is unlikely to bring a decision on the group’s oil policy for April, analysts are hoping it could shed some light on production plans.
Meanwhile, U.S. crude stockpiles were forecast to have drawn down in the week to Jan. 26, falling by some 200,000 barrels, according to analysts in a Reuters poll on Tuesday.
The poll was conducted ahead of reports from the American Petroleum Institute, due at 4:30 p.m. EST on Tuesday and the U.S. Energy Information Administration at 10:30 a.m. EST on Wednesday.