Crude oil prices opened higher in the trading session on Monday (19/December). When this news was writing, Brent Oil was up 0.74 percent at $80.44 a barrel.
Meanwhile, the WTI (West Texas Intermediate) oil was up 0.76% at $75.37 a barrel. Market optimism about the demand outlook emerged after Caixin reported a great news.
He reported that Chinese government was planning to reopen domestic flight lines. This plan is said to have the potential to increase the number of air passengers by 70 percent from pre-COVID levels in 2019.
Although the surge in COVID cases is still occurring in some regions of China, market optimism about the prospect of oil demand continues to grow. This is as the Chinese government will take accommodative policies by easing the Zero-COVID policy.
United States Oil Supply Still Constrained
The news of the easing of COVID restrictions is a positive catalyst that supports oil movements in the short term. The reason is, China is the world's largest oil importer.
That is why; the economic conditions there can determine the prospects for global oil demand. In addition, oil supplies in China's domestic market have reportedly been reduced.
That was as refiner centers in the country are spending export quotas for 2022. This prompted gasoline and diesel exports to soar to a year-high in November.
Separately, the Keystone oil pipeline leak is still an important catalyst for the movement of United States crude. That is why; market participants always look for the updates.
Disconnected Channels Reduce the Oil Supplies
The disconnection of the distribution channel connecting Canada to the oil refinery hub in the America Midwest region risks reducing supplies by about 622,000 barrels per day or 6 per cent of the national production.
To combat this, the Department of Energy in that country plans to purchase large quantities of crude oil to replenish their strategic oil reserves. Elsewhere, the Gold prices managed to rebound above $1790 a troy ounce.
It is especially after a Federal Reserve rate hike sparked market concerns over the risk of a US recession. Previously, gold was under pressure after the Fed announced a hike rate of 50 basis points.
That is also after that institution projected a higher terminal rate in 2023. Meanwhile, the European Central Bank (ECB) also decided to raise interest rates by 50 basis points.
China wants to Accelerate the Growth
It seems that ECB indicated a further rate hike to curb inflation in a sustainable manner. Still from China, that country has experienced three waves of COVID-19 after Beijing decided to ease restrictions on activity.
However, they still plans to ramp up economic improvements in 2023. There is no doubt that market demand has been affected.
China has been determined to counter all pessimism about the economy, and will do whatever it takes to accelerate growth. That was said by Naeem Aslam, an analyst at Avatrade.
West Texas Intermediate crude rose yesterday to the $76.60 per barrel area. In fact, people still have fears of a major recession going on and that hasn't gone away.
Crude Oil Rallied to $140
It will be difficult to see significant gains as said by Bob Yawger, a Mizuho's director of energy trading. Crude oil briefly rallied to the $140s a barrel this year after Russia invaded Ukraine in February.
After that, fears of oversupply and recession put pressure on oil prices. EU energy ministers yesterday agreed to cap Russian oil prices to be effective by 15 next month.
Meanwhile, the Federal Reserve (Fed) and the Europena Central Bank (ECB) last week raised their interest rates. It seems that they also want to raise interest rates again in the coming months.
Elsewhere, the Bank of Japan may change its monetary policy. The prospect of further interest rates could hurt economic growth next year and potentially depress crude oil demand.
