Oil prices rebound on China reopening optimism, easing Fed fears By Investing.com


© Reuters.

By Ambar Warrick

Investing.com– Oil prices rose on Monday, as investors cited an economic opening in China and the Federal Reserve’s less oil-fueled rhetoric will help fuel a recovery in oil demand this year.

China has reopened its international borders for the first time since 2020, a clear sign that the country wants to completely move away from the strict zero-covid-19 policy that has crippled regional economic growth for the past three years. .

Oil markets are betting that the opening will lead to a sharp recovery in demand, as more parts of the world’s biggest crude importer return to pre-pandemic production levels. Some analysts predict that crude oil prices could reach $140 per barrel this year on improved Chinese demand.

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It was up 0.8% at $79.23 a barrel, while it was up 0.7% at $74.31 a barrel at 20:26 ET (01:26 GMT).

But both contracts posted their worst weekly losses in a month, falling nearly 9% in the first trading week of 2023.

While economic growth in China is expected to eventually rebound this year, the country is still grappling with its worst-ever outbreak of COVID-19, which threatens to overwhelm its healthcare system and potentially cripple economic activity. fail more.

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This perception, along with a warning of a global recession, weighed on oil prices in recent sessions.

Still, oil markets were also supported by expectations that the Federal Reserve will return to its dovish stance in the coming months, as Friday’s data showed further cooling in the United States. A gradual rate hike by the Fed is expected to ease some of the pressure on the US economy and support crude demand.

Oil prices in the world’s largest economy remained steady through December, as the holiday season and cold weather boosted gasoline and demand.

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But this provided limited support to oil prices, as economic indicators in the United States and other major economies showed further cooling.

This week the focus is on the United States, which is expected to factor into the path of US monetary policy.

The US Department of Energy recently rejected a proposal by companies to start tapping the country’s strategic oil reserves as early as February, saying crude prices were still too high. The US government has signaled that it will only begin replenishing reserves when oil reaches $70 a barrel.

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