A day after travellers flooded into China as a result of the reopening of borders, lifting the expectation for gasoline demand and partially allaying worries about a global recession, oil prices began to rise on Monday.
By 0114 GMT, Brent crude futures had increased by 53 cents, or 0.7%, to reach $79.10 per barrel, while U.S. West Texas Intermediate crude had increased by 46 cents, or 0.6%, to reach $74.23 per barrel. Financial markets are being boosted and the dollar is being depressed by expectations of less aggressive U.S. interest rate increases.
Currency-denominated commodities are more affordable for investors holding foreign currencies due to the lower dollar. Their greatest weekly drops at the beginning of a year since 2016 occurred last week when both Brent and WTI fell more than 8%.
Oil prices have been positively correlated with inflation since 2022, according to Reuters. Hence, recession worries caused crude oil futures to experience their largest weekly losses in a month, according to CMC Markets analyst Tina Teng. However, China’s reopening may temporarily halt the decline.
The outlook for China’s demand for transportation fuels improved on Saturday when its borders were opened for the first time in three years. China is the second-largest consumer of oil in the world. According to Beijing, over 2 billion domestic visits for the Lunar New Year period are anticipated, which is almost twice as many as in 2018 and a return to levels that are 70% higher than in 2019.
There are still worries, though, that the enormous influx of tourists could lead to an increase in illnesses once more and halt China’s economic recovery. As speculators reexamined short-term concerns over cold weather as well as anxieties about supply constraints and unloaded contracts, energy futures for crude oil, processed goods, and natural gas have plunged in the new year.
According to energy services company Baker Hughes Co., U.S. energy companies reduced the number of active oil and natural gas rigs by seven last week, the largest weekly decrease since September 2021.
