Oil stays high on expected Chinese demand recovery
OIL prices held near this year’s highs on Monday (Jan 16), as easing Covid restrictions in China raised expectations for a recovery in demand from the world’s top crude importer.
Brent crude fell 0.5 per cent or US$0.41, to US$84.87 a barrel by 1236 GMT. US West Texas Intermediate crude was down 0.4 per cent or US$0.28, at US$79.58 per barrel, amid thin trade during Monday’s US public holiday.
Both contracts rose more than 8 per cent last week in the biggest weekly gains since October 2022. This came after China abandoned what remained of its zero-Covid policy by reopening its borders on Jan 8.
China’s crude imports rose 4 per cent year on year in December. An expected resurgence in travel for the Chinese New Year holiday at the end of this week has raised the outlook for transport fuel demand.
ANZ analysts said that traffic levels in China were rebounding from record lows after the easing of Covid restrictions, resulting in stronger demand for crude and oil products. But reports over the weekend highlighting an increase in Covid-related deaths weighed on sentiment.
PVM Oil Associates analyst Stephen Brennock said: “While China’s outlook has turned a corner, it must be noted that the normalisation of its oil demand will be gradual... As things stand, China’s oil recovery remains anticipated, rather than realised.”
The United Arab Emirates’ energy minister Suhail al-Mazrouei said on Monday that oil markets were balanced.
Investors will be hunting for clues about global demand and supply outlooks from the World Economic Forum in Davos, which opened on Monday. They will also be on the lookout for monthly reports to be released this week, by the Organization of the Petroleum Exporting Countries and the International Energy Agency.
Additionally, investors will be watching a Bank of Japan meeting this week, to determine if the central bank will defend its super-sized stimulus policy. REUTERS
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