Oil Ekes Out Modest Gains As China Promises To Focus On Economy

But analytical thought still skews towards overall pessimism for the New Year: File Image/Pixabay

Monday saw a modest return to gains for crude prices, based not on a growing bullish sentiment but tentative hope that Xi Jinping, president of China, was serious in his pledge to focus on his country''s economy rather than pursuing his ruinous zero tolerance Covid policy.

West Texas Intermediate rose 90 cents to $75.19 per barrel and Brent gained 76 cents to settle at $79.80 per barrel; however, this was not enough to derail expectations that oil will wind up with a second monthly loss due to recession fears in the U.S. and Europe.

Analytical thought on Monday ranged from guardedly optimistic to outright pessimistic, the former represented by Naeem Aslam, analyst at Avatrade; she said, "There is no doubt that demand is being adversely influenced; however, not everything is so negative as China has vowed to fight all pessimism about its economy, and it will do what it takes to boost economic growth."

Bob Yawger, director of energy futures at Mizuho, was less charitable about the overall state of affairs: "The reality here is that we still have a fear of a great recession looming on the horizon that has not gone away.

"It's going to be difficult to make big gains here."

Even more pessimistic was Stephen Brennock, analyst at PVM: with regard to the U.S. Federal Reserve and European Central Bank raising interest rates last week and promising more, he said, "The prospect of further rate rises will hit economic growth in the new year and in doing so curb demand for oil."

Also not helping the overall dour sentiment was Russia, whose oil flows were said to be resilient despite the hoopla over the Group of Seven and European Union's price cap imposed against the former Soviet Union for its invasion of Ukraine.

A cap of another kind was debated on Monday by EU nations: energy ministers said they were optimistic about the outcome of two months' worth of negotiations to cap gas prices, which would be triggered if front-month contract prices on the Dutch TTF, Europe's main benchmark for natural gas prices, exceed 188 euros ($200) per megawatt hour for three days.

Agnes Pannier Runacher, energy minister for France, said, "There will be difficult discussions, but I am confident in our ability to reach a collective agreement."

The cap is intended to protect consumers from steep prices that have occurred throughout the bloc due to the Russia/Ukraine war; the controversy lies in the argument that such intervention would be a risk to financial stability in Europe.