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Oil Prices Rise as China Reopening Helps Demand Outlook

Commodities Sep 18, 2022 09:10PM ET
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By Ambar Warrick

Investing.com-- Oil prices started the week on a strong note as the lifting of COVID lockdowns in a major Chinese city boosted optimism over an eventual demand recovery in the world’s largest crude importer.

The Chinese megacity Chengdu - which was the biggest city to face COVID lockdowns after Shanghai earlier this year - is set to begin scaling back a two-week lockdown from Monday. The move is expected to boost economic activity in the city, with the resumption of public and private transport likely helping fuel demand.

London-traded Brent oil futures rose 1% to $92.50 a barrel, while U.S. West Texas Intermediate futures rose 1.2% to $85.81 a barrel by 20:49 ET (00:49 GMT). Both contracts were recovering from three consecutive weeks of losses, amid concerns over a possible global recession.

Oil prices plummeted from highs hit earlier this year, as lockdowns in China, coupled with rising inflation and interest rates severely dented the outlook for demand this year. Chinese demand in particular suffered greatly as industrial production was suspended across several major hubs.

Supply gluts caused by a steady drawdown from the U.S. Strategic Petroleum Reserve, and supply increases by Russia, also pulled prices off annual highs.

Focus this week is on a U.S. Federal Reserve meeting, where the central bank is widely expected to raise rates by 75 basis points and signal more tightening to come. The move is also expected after U.S. inflation data read higher than expected in August, indicating that inflationary pressures in the country are yet to ease.

Both these factors are set to weigh heavily on economic growth, potentially hurting crude demand in the country. They are also expected to boost the dollar, making crude expensive for overseas importers.

Oil prices fell sharply last week after the U.S. inflation reading, while speculation over increased Russian supply also weighed.

Still, global oil demand is expected to benefit going into winter, with high natural gas prices pushing more countries to adopt oil for heating purposes.

U.S. gasoline demand has also shown resilience so far this year, and is expected to remain steady in the coming months.

Oil Prices Rise as China Reopening Helps Demand Outlook
 

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Comments (6)
Chris Sundo
Chris Sundo Sep 19, 2022 1:00AM ET
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However, I'm kind of looking forward to the upcoming BEAR TRAP and subsequent SHORT SQUEEZE ;)
Chris Sundo
Chris Sundo Sep 19, 2022 12:59AM ET
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'China Reopening'? -- What a propaganda/false news item, LOL. -- China changes its policies like some others change their underwear. -- Communist default is gross incompetence. Rely on the 'Reopening' wishful thinking at your own peril. Caveat emptor.
Bhagwan Dass
Bhagwan Dass Sep 18, 2022 11:51PM ET
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every commodity demand is full in india in cheaper price
Brad Albright
Brad Albright Sep 18, 2022 11:51PM ET
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Inferiority complex?
Bhagwan Dass
Bhagwan Dass Sep 18, 2022 11:19PM ET
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fake news shown to Indian people
Christopher Arntz
Christopher Arntz Sep 18, 2022 10:35PM ET
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Hey these ******writes. I guess he thinks everyone wants oil to rise. nitwit liberal probably
Todd Gray
Todd Gray Sep 18, 2022 9:47PM ET
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okay. but isn't china pretty much buying their oil from Russia? and, that doesn't affect oil spot price, because it's outside the basket.
Andrew Ulferts
Andrew Ulferts Sep 18, 2022 9:47PM ET
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Great observation.
 
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