As optimism from China’s reopening and a resurgence in oil demand overshadowed worries of a global recession, oil prices recovered ground on Monday after dropping more than $2 per barrel in the previous session. While U.S. West Texas Intermediate crude was at $74.89 a barrel, up 60 cents or 0.8%, Brent crude futures increased 72 cents, or 0.9%, to reach $79.76. Following Beijing’s relaxation of movement restrictions, China, the world’s biggest importer of crude oil and second-largest oil consumer, is currently suffering the first of three anticipated waves of COVID-19 instances.
Despite an increase in COVID cases, the prognosis for oil demand is improved by reopening optimism and accommodating policies, according to CMC Markets analyst Tina Teng. Chinese news site Caixin said on Friday that the country is planning to enhance airline capacity with the aim of bringing average daily passenger travel volumes back to 2019 levels by January 6.
China’s exports of diesel and gasoline surged further in November, reaching their highest level in more than a year, as refiners hurried to sell off growing inventories and exhaust their export quotas for 2022. A Canada to U.S. pipeline remained closed last week as its operator, TC Energy Corp, concentrated on cleaning up an oil spill, pushing up the prices of Brent and WTI by more than 3%.
Prices for U.S. heavy oil grades have been supported by the closing of the pipeline, which could have transported 622,000 barrels per day of Canadian crude to American refiners. The U.S. Energy Department’s Friday statement that it will start repurchasing crude oil for the Strategic Petroleum Reserve also contributed to the prediction for higher prices. Since this year’s record 180 million barrel release from the stockpile, this will be the first purchase by the United States.