On Monday, the price of oil went up as the possibility of a recovery in demand for the commodity gained ground against concerns about a global economic slowdown. The prospect of demand recovery gained ground as a result of China’s decision to relax COVID-19 curbs and the United States’ decision to buy back oil for its state reserves.
By 7:53 GMT, the price of a barrel of Brent oil had increased by 42 cents, which is equivalent to a gain of 0.5%, to $79.46. The price of a barrel of US West Texas Intermediate crude had increased by 38 cents, which is equivalent to a gain of 0.5%.
Both of the benchmarks dropped by more than $2 a barrel on Friday, in response to hawkish comments made by the central banks of the United States and Europe on interest rate rises, which raised fears of a future recession.
After Beijing eased limits on people’s ability to travel, China, which is the world’s largest importer of crude oil and the second largest consumer of oil, is seeing the first of what is likely to be three waves of COVID-19 cases.
Tina Teng, an analyst at CMC Markets, stated that despite an increase in the number of COVID cases, the reopening optimism and supportive policies strengthen the prognosis for oil’s demand.
According to satellite data provider Kayrros, China’s sudden halt to its “dynamic zero” COVID policy has sparked fresh life into its ailing aviation industry, with average jet fuel consumption soaring by 75%, or roughly 170,000 barrels per day, in only two weeks.
Caixin, a Chinese news site, stated on Friday that China intends to raise flight volumes with the objective of restoring the country’s average daily passenger flight volumes to 70% of 2019 levels by January 6th.
experts from Haitong Futures stated that while the broad view is good, the route of recovery might be sluggish and rocky given the poor COVID scenario in the short future.
During a two-day meeting behind closed doors for the purpose of plotting the course of the economy in the coming year, China’s top leaders and policymakers vowed to focus on stabilising their nation’s $17 trillion economy in 2023 and to step up the process of adjusting policies to ensure that key objectives are met.
“Fiscal stimulus and steady monetary policy will be the primary instruments for growth,” the author writes.
According to Iris Pang, chief economist of Greater China at ING Bank, “We anticipate that there will be a budget deficit of around 8% of GDP the following year.”
According to the opinions of economists working for Morgan Stanley, a more rapid and precipitous increase in mobility is consistent with a more robust recovery in GDP growth beginning in the early second quarter of 2023.
The United States Department of Energy said on Friday that it would begin repurchasing crude oil for the Strategic Petroleum Reserve for delivery in February of the following year, which provided more support for the expectation of higher prices.
This will be the first purchase made by the United States of America since the record-breaking discharge of 180 million barrels from the stockpile earlier this year.