Oil heads for second consecutive week of gains

London — Oil rose on Friday and was heading for a second straight weekly gain, spurred largely by brightening economic prospects for China and resulting expectations of a boost to fuel demand in the world’s second-biggest economy.

The lifting of Covid-19 restrictions in China is set to increase global demand to a record high this year, the International Energy Agency (IEA) said on Wednesday, a day after oil cartel Opec also forecast a Chinese demand rebound in 2023.

Brent crude gained 38c, or 0.4%, to $86.54 a barrel by 9.12am GMT. US crude advanced 74c, or 0.9%, to $81.07.

“Many traders believe it is highly likely that we are going to see higher demand coming from China as it continues to dismantle its Covid-19 policies,” said Naeem Aslam, analyst at broker Avatrade.

Both benchmarks were heading for a weekly gain of about 1.5%.

Oil was also supported by hopes that the US central bank will soon downshift to smaller rises in interest rates and by hopes for the US economic outlook.

A Reuters poll predicted that the US Federal Reserve will end its tightening cycle after increases of 25 basis points at each of its next two policy meetings and is then likely to hold rates steady for at least the rest of the year.

The chances of a “soft landing” for the US economy appear to be growing, Federal Reserve vice-chair Lael Brainard said on Thursday. The Fed’s next rate-setting meeting is over January 31 to February 1.

The two largest economies in the world need more crude, said Edward Moya, senior market analyst at Oanda.

“The oil market has been down on global recession fears, but it is still showing signs it can remain tight a little while longer,” he said.

Oil rose despite U.S. inventory figures this week showing crude stockpiles rose by 8.4-million barrels in the week to January 13 to about 448-million barrels, the highest since June 2021. 

Reuters