On Monday, oil prices increased as investors anticipated a rebound in demand from the world’s largest consumer of crude oil after news that China would extend liquidity measures to aid its pandemic-hit economy.
By 06:42 GMT, Brent oil futures had recovered from last week’s 6.4% drop, rising 81 cents, or 0.88%, to $92.44 per barrel. Following a 7.6% weekly drop, U.S. West Texas Intermediate oil was trading at $86.33, up 72 cents, or 0.84%.
On Monday, the People’s Bank of China extended maturing medium-term policy loans at the same interest rate they have been using for the last two months.
The complete rollover was seen by analysts as an indication that the central bank would keep its easy monetary policy in place.
According to a senior National Energy Administration official, the government will also significantly increase its domestic energy supply capacity and strengthen risk management in critical commodities such as coal, oil and gas, and electricity.
At a press conference in Beijing, another government official said that China will increase its ability to store important goods in reserve.
Tina Teng, an analyst at CMC Markets, says that oil prices went up after Chinese President Xi Jinping said at the Party Congress that he would take steps to help the economy.
This week should see the publication of important trade and economic statistics from China. GDP growth may pick up in the third quarter, but President Xi’s strict COVID-19 policy means that the world’s second largest economy is on track for its poorest performance in over half a century.
Since OPEC+ cutbacks will reduce supply before the EU embargo on Russian oil and since a strong U.S. currency and additional interest rate rises from the U.S. Federal Reserve limit price gains, oil prices are predicted to remain volatile in the near future.
The president of the Federal Reserve Bank of St. Louis, James Bullard, said on Friday that inflation had become “pernicious” and hard to control, and that higher increases of three-quarters of a percentage point were needed to keep “frontloading.”
The White House escalated its verbal attack on Saudi Arabia on Monday, accusing Riyadh of trying to pressure other countries into supporting the steep production cut agreed to this month. On Sunday, the Organization of the Petroleum Exporting Countries (OPEC) and their allies, including Russia, lined up to endorse the cut.
Since several OPEC+ members are already producing below their objectives, the 2 million bpd reduction that was agreed on October 5 would really amount to a drop of roughly 1 million bpd.
Even so, Saudi Arabia, the world’s biggest exporter, plans to keep sending the same amount of goods to major Asian markets as it did in November.
In a report, analysts at ANZ Research predicted that tighter stocks of oil and oil products, along with impending supply worries, would keep prices volatile.