Oil on Friday posted its largest gain in three months this week, mostly recouping the prior week’s steep decline, as confidence in China’s recovery solidified among traders.
West Texas Intermediate for February delivery rallied 1.88 percent to close at US$79.86 per barrel, capping an 8.26 percent weekly advance that marked its strongest week since October last year.
Brent crude for March delivery rose 1.49 percent to US$85.28, up 8.54 percent from a week earlier.
China is ramping up purchases of crude after Beijing issued a fresh round of import allowances, and consumption is poised to surge to a record this year following the nation’s dismantling of its “zero COVID” policy.
The factors that drove the selloff in the second half of last year — Chinese lockdowns and global recession fears — are now in reverse, said Bjarne Schieldrop, chief commodities analyst at SEB AB.
“When China reconnects with Asia and the world, there will be a significant increase in demand,” Schieldrop said.
Daily demand — which contracted last year — is to climb by 800,000 barrels per day this year, according to the median estimate of 11 China-focused consultants surveyed by Bloomberg News.
That would take consumption to an all-time high of about 16 million barrels per day, the survey showed.
Oil’s bulls, of which there are many, have built a large part of their outlook on growth in Chinese demand, with Goldman Sachs Group Inc’s Jeffrey Currie saying that crude is the “best reopening play.”
“Demand recovery is expected to accelerate from the second quarter onward as traffic rebounds and the number of flights, especially international flights, gradually recovers,” said Yitian Lin, research associate of oils and refineries at Wood Mackenzie Ltd, who said that daily demand could rise by 970,000 barrels.
Data on Friday showed that China’s crude imports hit a record for the month of December as shipments in the final quarter of last year came in almost one-fifth higher than the preceding three months.
Bolstering sentiment across markets, US consumer prices last month posted the first monthly decline since 2020, fueling expectations that the US Federal Reserve would slow the pace of interest-rate hikes.
Oil has pushed higher after a rocky start to the year, with forecasters from Goldman Sachs Group to hedge fund manager Pierre Andurand predicting prices would rally above US$100 a barrel this year.
There are also tentative signs that trading activity has picked up in the new year, with open interest across the main oil futures standing at its highest since late October.
Additional reporting by staff writer
CONSIDERATIONS: The NSTC instructed the park to assist laid-off workers and urge companies to use furlough programs to ease the effects of falling demand Firms in the Hsinchu Science Park (新竹科學園區), which houses major tech companies, reported laying off 496 employees last month amid weakened global demand, Hsinchu Science Park Bureau director-general Wayne Wang (王永壯) said yesterday. Wang told a news conference that 48 companies in the science park laid off employees last month, including one hard disk supplier which let go 241 employees as part of a plant closure due to falling demand. Other companies reported sporadic layoffs as they adjusted to weakening demand, he said. Wang made the remarks after local media reported the layoffs over the weekend. Although the global economy is struggling with high
German Chancellor Olaf Scholz and German Minister for Economic Affairs and Climate Action Robert Habeck have promised to solve investment subsidy issues for Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and Intel Corp, despite the country’s budget woes. Uncertainty over the funding to TSMC and Intel has arisen after a ruling by the German Federal Constitutional Court, which cast doubt over subsidies for construction of local semiconductor chip plants. On Nov. 15, the court ruled that the German government’s decision last year to reallocate 60 billion euros (US$65.74 billion) of unused funding from COVID-19 pandemic support measures to its Climate and Transformation Fund
LONG ROAD AHEAD: The US is somewhere between one and two decades away from achieving the Biden administration’s goal to achieve chip autonomy, Jensen Huang said Nvidia Corp CEO Jensen Huang (黃仁勳), who runs the semiconductor industry’s most valuable company, said the US is as much as 20 years away from breaking its dependence on overseas chipmaking. Huang, speaking at the New York Times’ DealBook conference in New York on Wednesday, explained how his company’s products rely on myriad components that come from different parts of the world — not just Taiwan, where the most important elements are manufactured. “We are somewhere between a decade and two decades away from supply chain independence,” he said. “It’s not a really practical thing for a decade or two.” The outlook suggests
GREEN SOLUTIONS: The company said that it is set to become one of the very few suppliers of low-carbon emissions cement, which would give it a competitive edge Taiwan Cement Corp (台灣水泥) plans to spend up to 770 million euros (US$843.5 million) to boost its holdings in two cement ventures in Turkey and Portugal as demand for low-carbon emissions cement rises in Europe, the company said on Monday. Taiwan Cement’s board of directors has approved a plan to lift the company’s stake in OYAK Denizli Cimento, a joint venture with Turkey’s OYAK Group, to 60 percent from 40 percent and to increase its stake in Cimpor Portugal Holdings SGPS SA, a Portuguese cement joint venture with OYAK, to 100 percent from 40 percent, it said in a statement. “Through increased