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Crude oil soars to two-week high on Chinese growth optimism

Published 01/17/2023, 09:24 AM
Updated 01/17/2023, 09:25 AM
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By Peter Nurse   

Investing.com -- Oil prices rose Tuesday, climbing to their highest levels in two weeks as Chinese economic growth data raised optimism that the country’s reopening from COVID restrictions will trigger a surge of demand this year from the world’s largest crude importer.

By 09:25 ET (14:25 GMT), U.S. crude futures traded 1.3% higher at $81.15 a barrel, while the Brent contract rose 2% to $86.17 a barrel. 

China's gross domestic product expanded 3% in 2022, its second-weakest growth since 1976, and considerably below the official target of “around 5.5%.”

That said, this growth was still above analysts' forecasts, and the economy expanded 2.9% in the final quarter of 2022 from a year ago, helped by Beijing's rolling back of its zero-COVID policy in December.

“Chinese data released overnight was material and very much supports this year's hottest trend that China's zero-Covid reversal will spark resurgent Chinese demand,” said analysts at ING, in a note.

“The December data, in particular, supports the proposition that despite the pick-up in case numbers, the freedom of movement story is positively dominating the Chinese demand story.”

Additionally, China’s Vice Premier Liu He told the World Economic Forum’s annual meeting in Davos, Switzerland, earlier Tuesday that his country’s economy will likely rebound to its pre-pandemic growth trend this year after coronavirus infections passed their peak.

There was also positive economic news from Europe, as the ZEW economic sentiment index for Germany, the Eurozone’s largest economy, swung back into positive territory in January, climbing to its highest level in 11 months.

The Organization of Petroleum Exporting Countries released its monthly report earlier Tuesday, and kept its forecast for oil demand growth unchanged for 2023 at 2.2 million barrels per day, saying the forecast remains surrounded by uncertainties including global economic developments, shifts in COVID-19 containment policies, and geopolitical tensions.

The Secretary General of OPEC, Haitham al-Ghais, said, in an interview at Davos, that the organization will do "whatever it takes" to keep the oil market balanced this year. 

He added that the group is “cautiously optimistic” about the outlook for the world economy, balancing an expected slowdown in western countries against a rebound in demand from China.

The release of U.S. inventory data from the American Petroleum Institute has been pushed back to Wednesday this week owing to the U.S. holiday on Monday.

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