Oil continues higher following last week's gain

Oil edged higher after its biggest weekly advance since early April, extending a short-covering rally as traders weighed a raft of data from China.

Brent traded above $82 a barrel after climbing 3.8% last week, the first weekly gain in four. Chinese industrial output and fixed-asset investment posted slower growth, and oil refining fell to the lowest rate this year after more plants shut for maintenance. However, retail sales data offered some encouragement, picking up by more than expected. 

Crude futures powered higher last week, reversing a sharp slump after OPEC+ signaled the return of some barrels to the market later this year. The recovery was driven in part by a major bout of short-covering, with outright bearish wagers on the global Brent benchmark falling by the most since 2020. 

“After three weeks of losses, the oil complex finally made amends and gained some traction,” said Tamas Varga, an analyst at brokerage PVM. “The move higher was not unreservedly convincing, nonetheless developments over the past five trading sessions did not indicate any souring of investors’ sentiment either.”

Oil has trended lower since early April on signs of robust supply and concerns over demand, particularly from China. OPEC+ recently rattled the market with a plan to return more output later this year, forcing key members to clarify that the group can pause or reverse production changes if necessary.

China’s oil refining — known as crude throughput — is expected to be flat or fall this year for the first time in two decades, excluding a downturn in 2022 due to Covid-19, according to most market watchers surveyed by Bloomberg. The nation processed a record volume in 2023 as demand rebounded.