Oil rises due to economic optimism in China
2022.12.19 01:50
Oil rises due to economic optimism in China
Budrigannews.com – Oil rose on Monday as fears of a global recession gave way to the possibility of demand recovery, led by China’s loosening of COVID-19 restrictions and the United States’ decision to buy back oil for its state reserves.
By 0458 GMT, futures were up 74 cents, or 0.9%, to $79.78 a barrel, and U.S. West Texas Intermediate crude was up 74 cents, or 1%, to $75.03 a barrel.
Following hawkish remarks made by central banks in the United States and Europe regarding interest rate increases, which raised concerns of a possible recession, both benchmarks fell more than $2 per barrel on Friday.
China, the No. 1 importer in the world, 2 oil consumer, the first of three anticipated waves of COVID-19 cases after Beijing eased restrictions on mobility.
Tina Teng, an analyst with CMC Markets, stated, “The reopening optimism and accommodative policy improve oil’s demand outlook, despite a surge in COVID cases.”
According to satellite data company Kayrros, China’s ailing aviation sector has been given new life as a result of the country’s abrupt termination of its “dynamic zero” COVID policy. In just two weeks, the average demand for jet fuel has increased by 75%, or nearly 170,000 barrels per day.
Caixin, a Chinese news outlet, reported on Friday that China intends to increase flights with the intention of returning the country’s average daily passenger flight volumes to 70 percent of those of 2019 by January 6.
According to analysts from Haitong Futures, “the market will focus on the progress of demand resumption in China…the general outlook is positive…the path of recovery could be slow and bumpy given the severe COVID situation in the near term.”
During a closed-door, two-day meeting to chart the course of the economy for the coming year, China’s top leaders and policymakers stated that the country would also commit to concentrating on stabilizing its $17 trillion economy in 2023 and intensifying policy adjustments to ensure that key targets are met.
Stable monetary policies and fiscal stimulus will be the primary growth tools. Iris Pang, ING Bank’s chief economist for Greater China, stated, “We expect there to be a fiscal deficit of approximately 8% of GDP next year.”
The prospect of higher prices was further supported by the U.S. Energy Department’s announcement on Friday that it will begin repurchasing crude oil for the Strategic Petroleum Reserve in February of next year.
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Since the record-breaking 180 million barrel release from the stockpile this year, this will be the first purchase made by the United States.
