Oil prices rallied on Thursday, building on gains from the previous session as China’s demand outlook improved, but gains were limited ahead of US inflation data.
Brent crude rose 16 cents, or 0.2%, at 0442 GMT to $82.83, while West Texas Intermediate (WTI) crude rose 13 cents, or 0.2%, to $77.54 a barrel.
Both benchmarks rose 3% during Wednesday’s session on hopes for an improvement in the global economic outlook and concerns over the impact of sanctions on Russia’s crude oil production.
China is strengthening its crude stockpiles ahead of the Lunar New Year holiday as the demand outlook improves with the U-turn in COVID policy.
China, the largest oil importer, is reopening its economy following the end of tight COVID-19 restrictions, raising optimism that fuel demand will rise in 2023.
The Ministry of Industry and Information Technologies said that industrial production is expected to increase by 3.6% in 2022 compared to the previous year, despite production and logistics disruptions caused by COVID-19 restrictions.
Oil market optimism continues, fueled by the reopening of China, and increased travel fuels demand for gasoline and jet fuel as the Chinese New Year holiday approaches.
Travel data firm ForwardKeys said on Thursday that China’s outbound flight bookings so far are only at 15% of pre-pandemic levels, the week after the country announced it would reopen its borders, despite a 192% jump from the same period last year.
Upcoming US inflation data is a major risk factor for oil, prompting traders to be cautious ahead of Thursday’s data.
Economists are expecting the rise in core U.S. consumer prices to slow to an annual pace of 5.7% in December, versus 6% a month earlier.
As the European Union (EU) continues to work on further sanctions against Moscow due to the occupation of Ukraine, the market supports additional restrictions on sales of Russian fuel products, which will come into effect in February.
The international price ceiling sanction imposed by the EU on Russian crude oil sales came into effect on 5 December.
The US Energy Information Administration (EIA) said the February 5 ban on imports of petroleum products from Russia by sea could be more destructive than the EU ban on sea imports of crude oil from Russia in December.