Oil set for weekly gain on China optimism, brighter US outlook

Oil headed for a strong weekly gain, rebounding from a weak start to the year, on China’s improving demand outlook and cooling US inflation.

West Texas Intermediate was steady near $79 a barrel, approaching a 7 per cent advance this week. The Brent benchmark is poised for its strongest week since October. 

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 Covid Zero policy. 

US consumer prices in December posted the first monthly decline since 2020, fueling expectations that the Federal Reserve will slow the pace of interest-rate hikes and adding some bullish sentiment across financial markets.

Oil has pushed higher after a rocky start to the year, with a raft of forecasters from Goldman Sachs Group Inc. to top hedge fund manager Pierre Andurand predicting prices will rally above $100 a barrel in 2023. There are also tentative signs that trading activity has picked up in the new year.

“The selloff in the second half of 2022 was reduced China demand due to lockdowns and fears for a global recession due to higher interest rates — both 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.”

Prices

  • WTI for February delivery was up 0.6 per cent at $78.82 a barrel at 10:05 a.m. in London.
  • Brent for March settlement climbed 0.5 per cent to $84.44 a barrel.

© 2023 Bloomberg L.P.

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