Oil largely steady as rising supplies face Chinese demand hopes

Oil barrels in Faridabad, India, on Sunday, June 12, 2022. Extreme weather conditions in some nations, combined with Russia’s invasion of Ukraine, have led to a global squeeze in supplies of fossil fuels, and sent prices of oil, natural gas and coal soaring. Photographer: Anindito Mukherjee/Bloomberg

Oil were largely unchanged on Wednesday as signs of ample supply, including growing U.S. crude inventories, countered hopes for higher demand arising from a jump in manufacturing in top crude importer China.

Brent crude futures were up 8 cents to $83.54 a barrel by 11:29 a.m. EST (1629 GMT). U.S. West Texas Intermediate crude (WTI) fell 19 cents, or 0.3%, to $76.86.

U.S. crude inventories rose for the 10th straight week to its highest level since May 2021, growing by 1.2 million barrels to 480.2 million barrels last week, government data showed, beating analyst expectations of a 457,000-barrel rise.

A widening discount of WTI to Brent contributed to a jump in U.S. crude exports last week to record high at 5.6 million barrels per day, which resulted in a smaller build than in previous weeks, according to UBS analyst Giovanni Staunovo.

In other signs of ample supply, Russia's oil production reached the pre-sanctions level for the first time in February, the Kommersant business daily reported, and the Organization of the Petroleum Exporting Countries' production also rose in February, a Reuters survey.

"China's economy is rebounding now, and this can only be a positive driver for oil prices," said Stephen Brennock of oil broker PVM, adding that resilient Russian supply is keeping buying interest at bay.

Russia's second-largest oil producer Lukoil has set up ship-to-ship (STS) loadings of Urals oil near the western port of Kaliningrad, Refinitiv Eikon data showed and trading sources told Reuters on Wednesday.

STS loadings of Russian Urals crude hit a record high in the Mediterranean in January as traders moved cargoes onto larger vessels to make long-haul shipments to Asia more cost-effective.

An official index that showed China's manufacturing activity expanded at the fastest pace in more than a decade in February, added to hopes that the country's recovery can offset a global slowdown and boost oil demand.

While China's official manufacturing purchasing managers' index (PMI) climbed to 52.6 last month from 50.1 in January, a private sector survey also showed activity rising for the first time in seven months.

"Another round of upside surprise in China's PMI further provides conviction of a stronger than expected recovery, which supports a more optimistic oil demand outlook," said Yeap Jun Rong, market strategist at IG.