Oil Prices Dip Despite Ongoing Enthusiasm About China Demand Recovery

Meanwhile, impact of Russian sanctions appear problematic: File Image/Pixabay

Oil prices on Monday dipped minimally, with the leading mitigating factor said to be, yet again, rampant optimism over the prospects of China's economic recovery in the wake of the Chinese Communist Party abandoning its draconian zero Covid infection policy.

West Texas Intermediate was down 71 cents at $79.15 in thin trade due to a U.S. public holiday, and Brent fell 76 cents to $84.52 per barrel by 1448 GMT.

Traffic activity in China is recovering from record lows after the easing of Covid lockdowns, and data showed that the country's crude imports rose 4 percent year on year in December.

However, Stephen Brennock, analyst at PVM, warned that "While China's outlook has turned a corner, it must be noted that the normalization of its oil demand will be gradual … As things stand, China's oil recovery remains anticipated rather than realized."

Events this week that may affect oil prices are the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency releasing their monthly reports (which will give investors insight into global supply and demand dynamics), the World Economic Forum in Davos (which opened on Monday), and a Bank of Japan meeting to determine if it will defend its super-sized stimulus policy.

Meanwhile, Suhail Al Mazrouei, energy minister for the United Arab Emirates, told media on Monday that supply commitments by his cartel and its allies have helped avoid large swings in the oil market, which he described as balanced – but he added that natural gas remains unbalanced.

Also on Monday, Julian Lee, analyst at Bloomberg News, pointed to more data suggesting that the European Union's efforts to sanction Russia for its invasion of Ukraine are having problematic impact at best.

Lee wrote that, "Aggregate volumes of Russian crude rose by 876,000 barrels per day [bpd], or 30 percent, to 3.8 million in the week to Jan. 13; Baltic shipments were up by 626,000 bpd from the previous week, while those from the Black Sea and the country's Pacific ports also expanded."

However, Lee conceded that the sanctions have "led to much longer voyages for shipments, with journeys now taking an average of 31 days from Baltic ports to India, compared with just seven days from the same terminals to Rotterdam and about half that to Poland: that's putting more pressure on the dwindling fleet of ships whose owners are willing to haul Russian cargoes."