*
Market eyes China factory activity data due in the next
two days
*
Russia's western ports ship more Urals crude to China
-sources
*
OPEC output rises in February as Nigeria rebounds further
*
US crude output fell in Dec. to lowest since August 2022 -
EIA
*
API shows U.S. crude stocks rose last week - sources
(Updates with API data)
By Stephanie Kelly
NEW YORK, Feb 28 (Reuters) - Oil prices rose nearly 2%
on Tuesday, erasing the previous session's losses, as hopes for
a strong economic rebound in China offset worries about U.S.
interest rate hikes dragging down consumption in the world's
biggest economy.
Brent crude futures for April , which expired on
Tuesday, settled higher by $1.44, or 1.8%, at $83.89 a barrel.
The more active May contract rose $1.41, or 1.7%, to
$83.45.
U.S. West Texas Intermediate (WTI) crude futures gained $1.37, or 1.8%, to $77.05 a barrel.
"We're getting to a point where we're seeing some short-covering because it's the end of the month," said Price Group analyst Phil Flynn. For the month of February, Brent fell about 0.7%, while WTI dropped about 2.5%. Expectations of demand recovery in China underpinned gains, with the market awaiting key data over the next two days. Economists polled by Reuters expected that factory activity in the world's second-largest economy grew in February. "China's economic recovery will drive its demand for commodities higher, with oil positioned to benefit the most," JPMorgan analysts said in a client note.
Urals crude exports to China from Russia's Western ports rose in February from the previous month, on lower freight costs and rising demand, Reuters sources said. Oil prices are expected to rise above $90 a barrel toward the second half of 2023 as Chinese demand recovers and Russian output falls, a Reuters poll showed on Tuesday. Similarly, JPMorgan's oil analysts maintained their 2023 average price forecast on Brent at $90 a barrel.
Gains were capped by the threat of more U.S. rate increases after stronger-than-expected new orders for core U.S. capital goods in January, with U.S. Federal Reserve Governor Philip Jefferson saying inflation for services remained "stubbornly high".
The voices of those expecting a 0.5% increase in interest
rates by the Fed next month are getting louder, said PVM Oil
analyst Tamas Varga.
The Organization of the Petroleum Exporting Countries has
pumped 28.97 million barrels per day (bpd) this month, a Reuters
survey found, up by 150,000 bpd from January. Output is still
down more than 700,000 bpd from September.
Meanwhile in the U.S., crude production fell in December to
12.10 million bpd, its lowest since August 2022, Energy
Information Administration (EIA) data showed.
However, U.S. crude stockpiles have been growing and were
forecast to post a 10th consecutive week of builds, with
analysts in a Reuters poll expecting a rise of nearly half a
million barrels last week.
U.S. crude oil inventories rose by about 6.2 million
barrels in the week ended Feb. 24, according to market sources
citing American Petroleum Institute figures on Tuesday. Official U.S. government data on stockpiles is due on
Wednesday.
(Reporting by Stephanie Kelly in New York; additional reporting
by Ahmad Ghaddar in London and Trixie Yap in Singapore
Editing by Marguerita Choy and David Gregorio)
