Oil Posts Strong Weekly Gain on Optimism Over China's Reopening

Meanwhile, Russia is reportedly circumnavigating the EU sanctions: File Image/Pixabay

Oil ended the week far more robustly than it began the new year, posting another round of gains on Friday due to swelling optimism over the supposedly positive economic effect of China dumping its zero-tolerance Covid policy and allowing its people to travel internationally – even though the number of Covid cases in that country are rampant.

West Texas Intermediate settled up $1.47 at $79.86 per barrel, while Brent rose $1.25 to $85.28 per barrel; the trading capped an 8 percent plus weekly advance, the strongest weekly showing for the commodity since October.

Traders on Friday were said to be motivated by China ramping up purchases of crude after Beijing issued a fresh round of import allowances, and with consumption poised to a record high in 2023.

Bjarne Schieldrop, chief commodities analyst at SEB AB, said, "When China reconnects with Asia and the world, there will be a significant increase in demand."

While daily demand in China contracted in 2022, a survey of 11 China-focused consultants showed  that expectations are for a climb of 800,000 barrels per day (bpd) this year, which would mean an all-time high total daily consumption rate of 16 million bpd.

Adding to the emerging bullish sentiment were reports that U.S. consumer prices in December declined for the first time decline since 2020, which may in turn cause the Federal Reserve to ease the pace of interest-rate hikes.

In other oil related news on Friday, despite recent reports that the European Union's ban of almost all seaborne oil imports from Russia combined with the price cap is hurting the former Soviet Union economically, Julian Lee, commodities analyst at Bloomberg, pointed out that Russia is increasingly using its own tankers to beat the sanctions.

Lee wrote, "European-owned tankers have taken about 30 percent of the cargoes shipped from Russia's key western oil ports, down from about half before; by contrast, the share moving on Russian vessels has risen to 35 percent, up from 22 percent previously."

Lee added, "There's also been an increase in the number of vessels whose ownership information isn't known, suggesting some of those shadow-fleet tankers may have been deployed too."