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.
Photo: Reuters
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
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