Oil futures rose Friday and were on track for strong weekly gains, lifted by optimism over demand from China as the country lifts its strict COVID-19 curbs and reopens its economy.
Price action
- West Texas Intermediate crude for February delivery CL00, +0.13% CL.1, +0.13% CLG23, +0.13% rose 65 cents, or 0.8%, to $79.02 a barrel on the New York Mercantile Exchange, up 7.1 for the week.
- March Brent crude BRN00, +0.04% BRNH23, +0.04%, the global benchmark, was up 61 cents, or 0.7%, at $84.64 a barrel on ICE Futures Europe, heading for a 7.7% weekly advance.
- Back on Nymex, February gasoline RBG23, -0.58% ticked up 0.1% to $2.477 a gallon, while February heating oil HOG23, +0.26% gained 1% to $3.253 a gallon.
- February natural gas NGG23, -3.82% rose 1.4% to $3.745 per million British thermal units.
Market drivers
Oil has bounced sharply this week, taking back the bulk of the previous week’s steep slide. Expectations about demand from China have been cited as a key driver, while fears of a steep global economic downturn appear to have faded as signs of easing U.S. inflation have led investors to look for the Federal Reserve to slow the pace of monetary tightening in 2023.
“While early, there is already indication suggesting that the Chinese consumption machine is ramping,” said Michael Tran, energy market strategist at RBC Capital Markets, in a note.
China’s December crude imports came in at 10.9 million barrels a day, up 830,000 barrels a day from the previous 11 months of 2022, he said, while satellite imaging indicators suggest that crude inventories have been steady over recent weeks, but down around 30 million barrels from the summer 2022 peak.
“Given the focus on energy security, we anticipate that Chinese imports will continue to pick up, particularly as refinery runs ramp and stockpiling crude remains a strategic priority,” Tran wrote.
Oil saw an additional boost Thursday after U.S. data showed the annual rate of inflation fell for the sixth month in a row to 6.5% from 7.1%, or the lowest level in more than a year.
“While everyone in the oil complex sees upside risks to Chinese growth and the consumption recovery supporting higher oil prices, today’s rally is moving beyond the China border as lower inflation impulses encourage a soft landing as the Fed is more likely to pause,” said Stephen Innes, managing partner at SPI Asset Management, in emailed comments.
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