China's Economic Recovery Signals Push Up Oil Prices

Oil Prices on the Rise Following China's Economic Recovery Signals

Oil prices have been on the rise since Friday, with international benchmark Brent crude trading at $86.41 per barrel and the American benchmark West Texas Intermediate (WTI) at $80.87 per barrel. The increase in oil prices is largely attributed to China's recent economic recovery signals after COVID-19 measures were lifted last month, pushing oil demand higher.

Speaking at the World Economic Forum in Davos on Tuesday, China's Deputy Prime Minister responsible for the economy, Liu He, indicated that life and production in the country have returned to normal levels and expressed optimism for the Chinese economy. This positive outlook has been reinforced by the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC) who have both predicted that global oil demand will reach a record level in 2023, with nearly half of the gain coming from China. The IEA forecasts that global oil demand will rise by 1.9 million barrels per day this year to a record 101.7 million barrels per day.

However, there are also concerns that the unexpected increase in US commercial crude oil inventories, which rose by around 8.4 million barrels to 448 million barrels, could signal a drop in crude demand, limiting the price increase. This figure was against the market expectation of a decline of around 1.75 million barrels.

Despite the uncertainty surrounding the crude oil inventories, the rise in oil prices is a welcome development for oil-producing nations and oil companies who are still recovering from the impact of the COVID-19 pandemic on the industry. It is hoped that the steady growth in oil prices will be sustained over the coming months, supporting the continued economic recovery of the industry.