Chinese optimism pushes oil prices up

London — Oil steadied on Thursday as optimism over China’s demand outlook was tempered by caution over whether upcoming inflation data from the US will point to a slower increase in interest rates.

Top oil importer China is reopening its economy after the end of strict Covid-19 curbs, boosting optimism that demand for fuel will grow in 2023.

Brent crude rose 37c, or 0.5%, to $83.04 a barrel at 9.12am GMT, while US West Texas Intermediate crude gained 5c to $77.46. Both benchmarks rose 3% on Wednesday driven by optimism about the global economy.

“A softer landing for the US, and perhaps elsewhere, combined with a strong economic rebound in China following the current Covid-19 wave could make for a much better year than feared and stimulate extra crude demand,” said Craig Erlam of brokerage Oanda.

The US CPI data due at 1.30pm GMT is set to have a big effect on oil and the wider market by shaping expectations of the speed of interest rate hikes in the world’s biggest economy.

Economists expect the rise in core US consumer prices to slow to an annual pace of 5.7% in December, versus 6% a month earlier. Month-on-month headline inflation is expected at zero.

“The mood is unreservedly upbeat but let us remember: it can turn sour as quickly as it has improved if inflationary pressure proves entrenched,” said Tamas Varga of oil broker PVM.

The market is also bracing for an additional curb on Russian supply due to sanctions over its invasion of Ukraine.

The US Energy Information Administration said the upcoming EU ban on seaborne imports of petroleum products from Russia on February 5 could be more disruptive than the EU ban on seaborne imports of crude oil from Russia implemented in December 2022. 

Reuters