Oil rises as China recovery, U.S. buyback plan brighten outlook

Oil rose on Monday as the prospect of demand recovery, led by China’s loosening of COVID-19 curbs and the United States’ decision to buy back oil for its state reserves, gained the upper hand over global recession fears, Reuters reported.

Brent crude futures gained 42 cents, or 0.5 per cent, to $79.46 a barrel by 0753 GMT while U.S. West Texas Intermediate crude was at $74.67, up 38 cents, or 0.5 per cent.

Both benchmarks plunged more than $2 a barrel last Friday, following hawkish remarks from U.S. and European central banks on interest rate hikes that sparked worries of possible recession.

China, the world’s top crude oil importer and No. 2 oil consumer, is experiencing its first of three expected waves of COVID-19 cases after Beijing relaxed mobility restrictions.

“Despite a surge in COVID cases, the reopening optimism and accommodative policy improve oil’s demand outlook,” CMC Markets analyst Tina Teng said.

China’s abrupt end to its “dynamic zero” COVID policy is breathing new life into its ailing aviation sector, with average jet fuel demand jumping by 75 per cent, or nearly 170,000 barrels per day, in two weeks, according to satellite data firm Kayrros.

An announcement by the U.S. Energy Department on Friday that it will begin repurchasing crude oil for the Strategic Petroleum Reserve for delivery in February next year also supported the outlook for stronger prices.

This will be the United States’ first purchase since this year’s record 180 million barrel release from the stockpile.