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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Oil Prices Set For Another Weekly Gain As Chinese Demand Rebounds

  • Oil prices are on course for another weekly gain, with WTI breaking the $80 mark and Brent heading toward $86.
  • Rising optimism about the return of Chinese demand has been the main bullish factor for oil markets this week, with hopes that China’s Covid caseload has peaked.
  • Continuing signs of weakness in the U.S. economy look likely to cap any oil price rally, with worries that the S. manufacturing sector has already entered a recession.
Oil prices

Crude oil prices are about to end this week with another gain, driven by optimism about demand rebound in China.

It was that same optimism that yesterday pushed prices to the highest close since the start of December, Reuters reported. Brent crude gained $1.18 per barrel on Thursday and West Texas Intermediate added $0.85 to top $80 per barrel for the first time in weeks.

“Prices gained as China optimism continued to reign,” Charu Chanana, market strategist at Saxo Capital Markets, told Bloomberg today. “Reports that China’s Covid caseload has peaked further boosted optimism that demand will start to recover more sustainably.”

Meanwhile, Reuters cited new figures about Chinese demand showing that it rose by close to 1 million bpd in November, signaling further strengthening this year. If this strengthening in Chinese demand does materialize, it would keep the supply side of the oil market tight, adding an upside potential to prices.

"All roads seem to lead back to the same input - rising Chinese demand," Again Capital’s John Kilduff told Reuters. "There's just so much bullish sentiment out there, so much fear, that it keeps underpinning this market."

On the bearish side, there are the continued signs of weakness in the U.S. economy, with the latest updates including a drop in retail sales that suggests inflation remains problematic, and the likelihood that the U.S. manufacturing sector entered a recession in the final quarter of 2022.

This week, the Energy Information Administration’s petroleum report also weighed on prices as it estimated yet another weekly inventory build in crude oil, and not a small one, at that, at 8.4 million barrels. It followed a 19-million-barrel weekly inventory built estimated for the first week of January.

Bloomberg, meanwhile, noted that trading activity in oil has begun picking up recently after lower liquidity discouraged active trading last year, increasing the likelihood of more sharp swings in prices going forward.

By Irina Slav for Oilprice.com


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  • Mamdouh Salameh on January 20 2023 said:
    China’s appetite for oil and also other energy products is insatiable. Even when its appetite declines slightly, it still keeps a floor under global oil demand and prices.

    Because of being the world’s largest economy based on purchasing power parity (PPP), the largest crude oil importer and also the biggest exporter in the world, its impact on both the global economy and the oil market is far bigger than any other major economy including the United States.

    That is why its return to the market eclipses any bearish signs of weaknesses in the US economy.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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