Oil climbs as traders grow optimistic over China’s demand recovery

By Onome Amuge

Oil prices firmed in morning trading on Thursday after gaining about three per cent the previous day as traders maintained optimism  of a rebound in China’s fuel demand.

Brent, the benchmark for two thirds of the world’s oil, was up 0.08 per cent at $82.74 per barrel, while West Texas Intermediate (WTI), the gauge that tracks US crude, climbed 0.04 per cent at $77.44 a barrel.

“Oil prices have steadied this morning after recovering strongly on Wednesday. Enthusiasm is building in the aftermath of last week’s jobs report and a positive inflation reading today could further fuel that,” Edward Moya, a senior market analyst at Oanda remarked.

Moya added that the prospect of a softer landing, even avoiding recession, is as good as investors could have realistically hoped for once it became clear how high inflation was going to rise last year.

According to the senior market analyst, a softer landing for the US, and perhaps elsewhere, combined with a strong economic rebound in China following the current Covid wave could make for a much better year than feared and stimulate extra crude demand.

“Of course, this case very much focuses on the promising scenarios but they are also increasingly looking like the more plausible ones as well,” he added.

Also commenting on oil’s steady rise, Jeff Currie, global head of commodities at Goldman Sachs, said he expects Brent to reach $110 a barrel by the third quarter of 2023,bolstered  by the full reopening of  China and other Asian economies.

Amrita Sen, founder and director of research at Energy Aspects, also shared similar sentiments as she expects Brent to average $100 a barrel this year, driven by a recovery in China.

“China’s reopening is going to be the number one thing driving oil prices this year,” Sen stated while speaking at the recent  Gulf Intelligence Global UAE Energy Forum.

“The upside could be quite substantial, just depending on the timing of it. China is still grappling with a lot of Covid cases, which has meant that oil demand is yet to pick up quite substantially.

“But, we are starting to see some of the green shoots with regards to demand and the jet numbers are picking up and so is gasoline demand,” Sen added.