Oil Rebounds On Sudden China Optimism, But Trading Still Rudderless

Still, the loose consensus is that demand will cause market tightness soon: File Image/Pixabay

Oil traders on Monday were in a more positive mood compared to the past few sessions, causing the price of two key benchmarks to rise by over 1 percent on the notion that fuel demand in lockdown-free China would soon increase due to holiday travel.

According to Ctrip, China's largest online travel firm, overseas tour bookings for the upcoming May Day holiday were up 157 percent from the beginning of April.

Even though this and other figures are still below pre-Covid levels, the news stoked bullish sentiment, especially since experts said  supply-side constraints and not demand enthusiasm were to blame for the not-yet-fully-recovered figures.

Accordingly, Brent on Monday settled up $1.07, or 1.3 percent, at $82.73 per barrel while West Texas Intermediate settled up 89 cents, or 1.1 percent, at $78.76.

Bob Yawger, director of energy futures at Mizuho, remarked, "There's a lot of optimism around Chinese holidays as it relates to jet fuel demand, the first genuine numbers on Chinese demand construction."

Sugandha Sachdeva, an independent oil analyst, added, "Planned output cuts by the OPEC+ alliance and a strong demand outlook from China could provide a fillip to prices in the coming days."

Sachdeva was referening to the Organization of the Petroleum Exporting Countries recently announcing an unexpected output cut of around 1.16 million barrels per day (bpd).

Also supporting prices on Monday were no signs that Iraq's northern oil exports of about 450,000 bpd would resume any time soon after a month of standstill: four sources told media that aspects of an agreement between Baghdad and the Kurdistan Regional Government have yet to be resolved.

Still, Monday's trading performance did not contribute in the slightest to any sense of trajectory whether bullish or bearish: Carley Garner, a commodity broker and strategist at DeCarley Trading, said, "There are a lot of traders sitting on the sidelines trying to figure out a direction," and added that "traders are looking for a dip to get into; if we hold US$75, we can start making a way higher."