Oil prices climbed Monday as borders reopened in China, the world’s largest importer of crude, bolstering the outlook for fuel demand growth and offsetting global recession concerns.
Brent crude futures rose 90 cents, or 1.2%, by 0520 GMT to $79.47 a barrel, while West Texas Intermediate (WTI) crude rose 90 cents, or 1.2%, to $74.67 per barrel.
Hopes for less aggressive US interest rate hikes are stimulating financial markets and depressing the dollar. A weaker dollar makes dollar-denominated commodities more affordable for investors holding other currencies.
Both Brent and WTI fell more than 8% last week, their biggest weekly declines at the start of the year since 2016.
Crude oil prices rebounded from the previous week’s losses as the Chinese economy reopened and the Federal Reserve’s prospects for less aggressive monetary tightening created a favorable climate for demand to recover.
China opened its borders over the weekend for the first time in three years, as part of a “new phase” in the fight against COVID-19. Beijing says around 2 billion people are expected to travel domestically during the Lunar New Year season, almost double the movement from last year, close to about %70 levels of 2019.
Last week, airlines increased their January international seat capacity by 9.5%, to and from China, as they stepped up their flights after the border opened, according to aviation data.
Despite gains in oil on Monday, concerns remain that the heavy influx of Chinese travelers could cause another spike in COVID infections.
These concerns were also reflected in the market structure of indicative oil futures. Both front-month Brent and WTI contracts are in contango. Current prices are below the prices of later-delivery contracts, which typically indicates a bearish sentiment for the market.
Meanwhile, market sentiment remained negative as China’s battle with COVID-19 worsened. The surge in cases spreading across the country after most virus-related restrictions are lifted could stifle economic activity.
Energy futures for crude oil, refined products, and natural gas fell in the New Year as traders reconsider near-term concerns about cold weather and supply shortages and canceled contracts.
Energy services firm Baker Hughes Co said on Friday that last week, US energy firms saw the largest weekly decline since September 2021, cutting the number of operating oil and gas rigs by seven.
