Oil posted its largest gain in three months this week, mostly recouping the prior week’s steep decline, as confidence in China’s recovery solidified among traders.
West Texas Intermediate rallied above $79 a barrel on Friday, capping a more than 8% weekly advance that marked its strongest week since October. China is ramping up purchases of crude after Beijing issued a fresh round of import allowances, and consumption is poised to surge to a record this year following the nation’s dismantling of its Covid Zero policy.
The factors that drove the selloff in the second half of 2022 — Chinese lockdowns and global recession fears — are now in reverse, said Bjarne Schieldrop, chief commodities analyst at SEB AB.
“When China reconnects with Asia and the world, there will be a significant increase in demand,” Schieldrop said.
Bolstering sentiment across markets, US consumer prices in December posted the first monthly decline since 2020, fueling expectations that the Federal Reserve will slow the pace of interest-rate hikes.
Oil has pushed higher after a rocky start to the year, with forecasters from Goldman Sachs Group Inc. to hedge fund manager Pierre Andurand predicting prices will rally above $100 a barrel in 2023. There are also tentative signs that trading activity has picked up in the new year, with open interest across the main oil futures standing at its highest since late October.
WTI for February delivery was up $1.47 to settle at $79.86 a barrel in New York.
Brent for March settlement rose $1.25 to $85.28 a barrel.
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