By Barani Krishnan
Investing.com -- After the worst week in a month to launch the new year, crude prices settled up just 1% Monday as bulls in the market bet China’s reopening of its economy from tough COVID policies will boost oil consumption.
In the first session of January's second week, New York-traded West Texas Intermediate, or WTI, crude settled up 86 cents, or 1.2%, at $74.63 per barre, after hitting an intraday high of $76.72.
The U.S. crude benchmark fell more than 8% last week for its biggest weekly decline since Dec. 2. The dismal showing came after WTI’s drop of 10% between Tuesday and Wednesday — the worst for any first two days of oil trading in a year since 1991.
London-traded Brent crude settled up $1.08, or 1.4%, at $79.65 per barrel, after a session high at $78.42. Like WTI, Brent lost more than 8% last week.
Monday’s rebound in crude came after China fully reopened its borders to international trade to eliminate the last vestiges of the draconian COVID rules that shaped much of its social policies over the past three years.
Demand for oil in China typically rises each year after the Lunar New Year, which, this year, is due at the end of January. But with Beijing pivoting from a COVID-zero to a “COVID-anything” policy, there’s no telling yet how its oil demand will fare. Data last week showed Chinese manufacturing activity shrank for a fifth straight month in December, as the country grappled with an unprecedented spike in coronavirus cases.
Despite this, Beijing is pressing forth with enthusiasm on its reopening, with officials saying they expected about 2 billion trips domestically during the Lunar New Year season, nearly double last year's and 70% of 2019 levels.
In oil-specific developments, China also issued a second batch of 2023 crude import quotas, according to sources and documents reviewed by Reuters, raising the total for this year by 20% from the same time last year.
“Oil’s downward trend was approaching critical support, so energy traders were eagerly looking for any reason to jump back into the oil trade,” said Ed Moya, analyst at online trading platform OANDA. “Chinese hopes for an improving reopening from COVID could help propel oil prices much higher.”