On hopes that the removal of China’s harsh COVID-19 regulations will result in a revival in fuel consumption in the world’s largest oil importer, oil prices extended early gains to jump almost 1% on Wednesday.
By 0721 GMT, Brent crude futures had risen 76 cents, or 0.88%, to $86.68 per barrel after gaining 1.7% the previous day.
After increasing 0.4% on Tuesday, U.S. West Texas Intermediate (WTI) crude futures increased 85 cents, or 1.06%, to $81.03.
Around lunchtime in Asia, both oil futures—Brent reaching $87 per barrel and WTI futures reaching $81.42 per barrel—rose by more than $1 a barrel to set new 2023 highs.
The official objective of “about 5.5 percent” was missed by China’s economic growth in 2022, which was the second-worst result since 1976. However, even after China started to relax its zero-COVID policy in early December, the data still above experts’ expectations. According to Reuters’ survey of analysts, growth will increase to 4.9% in 2023.
Chinese oil demand will increase by 510,000 barrels per day (bpd) this year, according to the Organization of the Petroleum Exporting Countries (OPEC), after dropping for the first time in years in 2022 as a result of COVID containment measures.
However, OPEC maintained its 2.22 million bpd estimate for the growth of world demand for 2023.
“Growing hopes that China’s fuel demand will pick up after a recent shift in its COVID-19 policy lent support to oil prices,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.
“OPEC’s optimistic outlook on China’s demand also supported the market sentiment,” he said, predicting a bullish tone for this week.
A Reuters poll indicated that despite increasing oil product stockpiles, the market anticipated a reduction in U.S. crude stocks of about 1.8 million barrels.
In terms of supply, the U.S. Energy Information Administration (EIA) reported on Tuesday that oil output from the country’s top shale regions is expected to increase by roughly 77,300 bpd in February to a record 9.38 million bpd.
According to a senior Russian source familiar with the country’s stance, Russia anticipates that Western sanctions will have a considerable impact on its exports of oil products and its output, possibly leaving it with extra crude oil to sell.
According to ING analysts in a client note, the market will also be keenly monitoring more demand data from China in the International Energy Agency’s monthly report, which is coming later on Wednesday.