Brent crude rose 3.13% to $81.03 a barrel, while US West Texas Intermediate (WTI) crude rose 3.4% to $76.28.
China’s decision to reopen the borders, after a long period of control of covid-19, has boosted the market given the prospects of increased demand for oil in that country, the largest importer of black gold, according to experts. Added to this is the hope that the United States will decide on a lower-than-expected increase in interest rates, which will be key in the markets this week.
Last week, oil prices ended almost unchanged as the market weighed in on a weaker dollar and mixed US jobs reports. Although the biggest concern was the global recession.
In the previous week, both Brent and WTI were down more than 8%, the biggest weekly turn-of-a-year drop since 2016. Both benchmarks had gained around 13% over the previous three weeks.
“If the recession is avoided, global oil demand and demand growth will remain resilient,” said Tamas Varga of oil broker PVM, adding that events in China were the main reason for Monday’s gains.
“The gradual reopening of the Chinese economy will provide an additional and immeasurable layer of support for prices”he claimed.
As part of a “new phase” in the fight against COVID-19, China opened its borders over the weekend for the first time in three years. Domestically, some 2 billion trips are expected during the Lunar New Year season, nearly double that of last year and 70% of 2019 levels, according to Beijing.
Despite Monday’s oil price rebound, tConcerns still exist that the massive influx of Chinese travelers could cause another spike in COVID infections, while broader economic concerns also linger.
These concerns are reflected in the structure of the oil market. Both the short-term contracts for Brent and US crude are trading at a discount to the following month, a structure known as a contango, which often indicates bearish sentiment.
Source: Ambito
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