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Oil rises 1% in choppy trade on China demand hopes

Published 02/05/2023, 08:11 PM
Updated 02/06/2023, 03:05 PM
© Reuters. FILE PHOTO: Pump jacks operate at sunset in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford

By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices edged higher in choppy trading on Monday as markets weighed a return in demand from China against supply concerns and fears of slower growth in major economies curbing consumption.

Brent futures for April delivery rose $1.05, or 1.3%, to $80.99 a barrel, after trading between $79.10 and $81.25.

West Texas Intermediate crude (WTI) gained 72 cents, or 1%, to $74.11 per barrel, after hitting a high of $74.41 and a low of $72.25.

Prices were buoyed by prospects for China's recovery after the relaxation of COVID-19 restrictions.

The International Energy Agency (IEA) expects half of this year's global oil demand growth to come from China, the agency's chief said on Sunday, adding that jet fuel demand was surging.

Holding back gains however, Friday's blowout U.S. employment number raised expectations that the Federal Reserve's rate hikes will not end with a hard economic landing, and that the U.S. central bank may have more than one more rate increase left, which could curb economic growth and lower fuel demand.

The dollar also rose to a three-week high against the euro on Monday. A stronger dollar typically reduces demand for dollar-denominated oil from buyers paying with other currencies. [USD/]

"You've got a strong dollar, you're in a generally risk-off environment," said Robert Yawger, executive director of energy futures at Mizuho.

WTI and Brent had slid 3% last Friday after the strong U.S. jobs data.

Supply concerns continued to affect markets as operations at Turkey's oil terminal in Ceyhan halted after a major earthquake hit the region.

The BTC terminal, which exports Azeri crude oil to international markets, will be closed on Feb. 6-8 while operators assess earthquake damage, a Turkish shipping agent said.

© Reuters. FILE PHOTO: Pump jacks operate at sunset in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford

However, a preliminary Reuters poll showed that U.S. crude oil stockpiles likely rose by about 2.2 million last week.

Also, price caps on Russian products took effect on Sunday, with Group of Seven nations, the European Union and Australia agreeing on limits of $100 a barrel on diesel and other products that trade at a premium to crude and $45 a barrel for products that trade at a discount, such as fuel oil.

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