China Economy Outlook Drives Up Oil Price

Oil prices increased on Monday to $88 a barrel, extending gains from the previous week as a result of a more optimistic outlook brought on by expectations for an economic recovery in China, the world's largest oil consumer, this year.

At 10:25 GMT, West Texas Intermediate (WTI) U.S. crude was up 33 cents, or 0.4%, to $81.97 a barrel, while Brent crude was up 42 cents, or 0.48%, to $88.05 per barrel.

The U.S. benchmark only saw a 1.8% gain last week, compared to a 2.8% increase in Brent.

Due to the Lunar New Year vacation, Asian trading was slower but analysts predicted rising oil prices as a result of optimism anticipating China's reopening.

According to Mumbai-based energy consultant Sukrit Vijayakar, the market wants to hold onto long positions in case China's growth picks up again.

ANZ commodity analysts stated that data shows a significant increase in travel in China following the relaxation of COVID-19 curbs.

They cited a 22% increase in road traffic congestion so far this month compared to a year ago in the country's 15 major cities.

The increase in travel in China before the Lunar New Year holiday portends favourably for fuel consumption following the two-week break.

"The expected surge in demand comes as the market braces for further sanctions on Russian oil," ANZ analysts said.

In addition to their price restriction on Russian crude, which has been in effect since December, and an EU embargo on imports of Russian oil by sea, the European Union and the Group of Seven (G7) alliance will cap prices of Russian refined goods beginning on February 5.

In order to give time to evaluate the effects of the oil products price cap, the G7 has decided to postpone the assessment of the level of the price cap on Russian oil until March, one month later than initially anticipated.