By Peter Nurse
Investing.com -- Oil prices traded higher Monday, boosted by optimistic comments regarding the recovery in Chinese demand from the International Energy Agency.
By 09:35 ET (14:35 GMT), U.S. crude futures traded 0.2% higher at $73.50 a barrel, while the Brent contract rose 0.5% to $80.33 a barrel.
China’s economic recovery from the constraints of its recently rejected zero-COVID policy could be stronger than previously expected, the head of the International Energy Agency, Fatih Birol, said in an interview over the weekend.
He suggested there are some “first indications” from China that growth will accelerate quickly, with the Asian economic giant–the world’s biggest crude importer–alone potentially delivering around half of the forecast 2 million barrels a day increase in global oil demand this year.
This optimism has helped the market recover from last week’s sharp losses after a hot U.S. payrolls report boosted the dollar and ramped up worries of more interest rate hikes by the Federal Reserve. These could weigh on the global economy and dampen crude demand, especially from the U.S., the world’s largest consumer.
A stronger dollar makes commodities, including oil, which are denominated in the U.S. currency more expensive for foreign buyers.
Investors are also keeping an eye on the situation in Turkey, as operations at the country's oil terminal in Ceyhan were halted after a major earthquake struck nearby early on Monday.
Additionally, price caps on Russian products took effect on Sunday, with the major western powers agreeing on price limits of $100 per barrel on diesel and other products that trade at a premium to crude, and $45 per barrel for products that trade at a discount such as fuel oil.
“The ban will have the largest impact on Russian diesel and naphtha flows to the EU. However, EU buyers have had time to prepare for the ban. In the period leading to the cut-off, there were increased flows of middle distillates to the EU,” said analysts at ING, in a note.
The focus this week will be on a series of addresses by Fed members, starting with Chair Jerome Powell on Tuesday, as investors seek clues of Fed thinking in terms of future interest rate rises.
Additionally, Wednesday sees the release of the official U.S. crude inventories data from the Energy Information Agency, with recent large build in stocks pointing to a potential near-term supply glut in the world’s largest oil consumer.