Oil is poised for its highest close since early December with optimism that Chinese demand will quickly recover after abandoning the zero-Kovid policy.
U.S. crude oil continued its rise on Tuesday, reaching $81, following an 8 percent rise last week. Brent oil also tested $87.
OPEC Secretary-General Haitham Al-Ghais said he was “cautiously optimistic” about the global economy after the union predicts a stable crude oil market this quarter.
The International Power Agency’s (IEA) monthly report is expected to provide insight into the expected impact of sanctions on Russian flows in response to the war in Ukraine, as well as the rapid reopening of China.
US crude oil started the year badly
US crude had a strong start to the year, collapsing with flurry of global slowdowns in the opening week before rebounding strongly.
Alongside the change in policy in China, oil found reinforcements from the weaker dollar. While the Fed’s aggressive interest rate hikes were expected to come to an end, weakness in the dollar attracted attention.
Warren Patterson, Head of Commodity Strategy at ING Groep NV, said: “China’s economic recovery adds to the belief that we can see a strong rise in Chinese oil demand this year.”
Reflecting the optimistic mood of China, the world’s largest importer of crude oil, the country’s top economics official said the economy will likely return to its pre-pandemic growth trend this year. A Bloomberg poll conducted last week showed analysts expect Chinese crude oil consumption to hit a record in 2023.
Goldman Sachs Group Inc., one of the loudest voices for commodity bulls, raised its forecast for China’s GDP growth this year following stronger-than-expected economic data earlier this week. The bank raised the Chinese economy’s growth claim for 2023 from 5.2 percent to 5.5 percent.