Oil shrugged off a large US crude stockpile build with traders focusing on China as it speeds up purchases ahead of the Lunar New Year.

West Texas Intermediate rose more than 2% to trade near $77 a barrel on Wednesday. US crude inventories rose by 18 million barrels last week, the biggest jump since February 2021, according to Energy Information Administration data. The superlative jump was largely anticipated by the market following a southern freeze that idled much of the US Gulf Coast’s refining capacity. 

The strongest driver for prices remains China’s crude consumption. Chinese companies have been snapping up cargoes of US crude before Lunar New Year holidays. Earlier this week, the government issued a bumper batch of import quotas, spurring hopes of improved crude consumption. 

“Markets are less focused on less overall inventories and more on the global picture, said Brian Kessens, a portfolio manager at Tortoise. “Globally the focus is China and that’s going to be the macro-driver of crude oil throughout the first quarter.”

Oil has had a rocky start to 2023, slumping almost 10% in the first two sessions of the year on global recession concerns, before subsequently trending higher. Investors are keenly watching for clues on the outlook for US monetary policy, with JPMorgan Chase & Co.’s Chief Executive Officer Jamie Dimon saying rates may have to move higher than 5%.

Near-term time spreads are holding in a bearish contango structure, signaling ample supply. US benchmark’s prompt spread — the gap between the nearest two contracts — widened to as much as 27 cents after having started at 19 cents at the beginning of the year.

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