Oil rises as China’s recovery and US buyback plan brighten outlook

By Florence Tan and Muyu Xu

SINGAPORE (Reuters) – Oil rallied on Monday as prospects of a demand recovery, led by China’s easing of COVID-19 restrictions and the United States’ decision to buy back oil for its state reserves, got the better of global recession fears .

Brent crude oil futures gained 74 cents, or 0.9%, to $79.78 a barrel at 0458 GMT, while US West Texas Intermediate crude was up $75.03 a barrel, up 74 cents, or 1 %.

Both benchmarks fell more than $2 a barrel last Friday following aggressive comments from US and European central banks about interest rate hikes leading to a possible recession.

China, the world’s largest crude oil importer and No. 2 oil consumer, is experiencing the first of three expected waves of COVID-19 cases after Beijing eased mobility restrictions.

“Despite a surge in COVID cases, reopening optimism and accommodative policies are improving the outlook for oil demand,” said CMC Markets analyst Tina Teng.

China’s abrupt end to its “dynamic zero” COVID policy is breathing new life into its ailing aviation sector, with average demand for jet fuel rising 75%, or nearly 170,000 barrels per day, in two weeks, according to satellite data company Kayrros.

On Friday, news outlet Caixin reported that China plans to increase the number of flights with the aim of restoring the country’s average daily passenger flight count to 70% of 2019 levels by January 6.

“The market will focus on the progress of the demand recovery in China…the overall outlook is positive, but the recovery path could be slow and bumpy given the severe COVID situation in the near term,” analysts said. Haitong futures.

China also pledged to focus on stabilizing its $17 trillion economy by 2023 and stepping up policy adjustments to ensure key goals are met, its top leaders and policymakers said at a two-day closed-door meeting to set course. of the economy next year.

“The main tools for growth are fiscal stimulus and stable monetary policy. We expect a budget deficit of around 8% of GDP next year,” said Iris Pang, Chief Economist Greater China at ING Bank.

An announcement by the US energy department on Friday that it will begin buying back crude oil for the Strategic Petroleum Reserve for delivery in February next year also supported the outlook for stronger prices.

This will be the United States’ first purchase since the record 180 million barrels released from reserves this year.

(Adapted by Stephen Coates and Jacqueline Wong)

Leave a Reply

Your email address will not be published. Required fields are marked *