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Oil prices rose on Wednesday, extending the previous session’s gains, driven by optimism that a relaxation of China’s strict Covid-19 curbs will lead to a recovery in fuel demand in the world’s top oil importer.
Brent crude futures were up 52c, or 0.6%, at $86.44 a barrel at 1.51am GMT, after a 1.7% rally in the previous session.
US West Texas Intermediate (WTI) crude futures gained 55c, or 0.7%, to $80.73 a barrel, having risen 0.4% on Tuesday.
China’s GDP expanded 3% in 2022, missing the official target of “around 5.5%” and marking its second-worst performance since 1976. But the data still beat analysts’ forecasts after China rolled back its zero-Covid policy in December.
The Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report Chinese oil demand would grow 510,000 barrels per day (bpd) this year after posting in 2022 its first contraction for years due to Covid-19 containment measures.
But OPEC kept its 2023 global demand growth forecast unchanged at 2.22-million bpd.
“Growing hopes that China’s fuel demand will pick up after a recent shift in its Covid-19 policy lent support to oil prices,” said Toshitaka Tazawa, an analyst at Fujitomi Securities.
“OPEC’s optimistic outlook on China’s demand also supported the market sentiment,” he said, predicting a bullish tone for this week.
At the World Economic Forum (WEF) in Davos, China’s Vice-Premier Liu He on Tuesday welcomed foreign investment and declared his country open to the world after three years of Covid-19 isolation.
Oil was also boosted by a weaker US dollar, which steadied on Wednesday after falling against major currencies the previous day due to expectations a possible Bank of Japan (BOJ) policy shift could be a precursor to a tighter monetary policy.
A weaker dollar makes greenback-denominated oil less expensive for other currency holders and encourages buying.
On the supply-side, oil output from top shale regions in the US is due to rise by about 77,300 bpd to a record 9.38-million bpd in February, the US Energy Information Administration (EIA) said in a productivity report on Tuesday.
Russia, meanwhile, expects Western sanctions to have a significant impact on its oil product exports and its production, likely leaving it more crude oil to sell, said a senior Russian source with knowledge of the nation’s outlook.
