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Oil Prices On Track For A 6% Weekly Gain

After a weak start of the year, oil prices are on track for a respectable increase this week thanks to expectations of a rebound in China demand.

Also among the bullish factors were yesterday’s release of inflation data for the U.S. that suggested a slowdown and signs that the Federal Reserve may slow down with its rate hikes.

As regards China, the government this week issued a new batch of crude oil imports and that batch suggested Beijing expects stronger oil demand in the country. Together, the two batches of import quotas issued since the start of the year see demand for imported crude at 132 million tons. This compares with 109 million tons a year earlier.

China may become a major fuel exporter to the European Union once the EU initiates its embargo on Russian fuel imports in February.

"Given the focus on energy security, we anticipate that Chinese imports will continue to pick up, particularly as refinery runs ramp and stockpiling crude remains a strategic priority," Reuters quoted RBC commodity strategist Michael Tran as saying earlier today.

Morgan Stanley, meanwhile, expects supply to tighten in the second half of the year, pushing prices consistently higher.

"We see the oil market coming into balance in 2Q and turning tight in 3Q and 4Q, supporting higher prices later this year," the bank’s commodity analysts said in a note this week, pointing out China’s post-Covid reopening, Russian supply uncertainty, a recovery in air travel, and a slowdown in U.S. shale production growth among the factors that will drive prices higher.

Bloomberg, for its part, has reported that Chinese oil demand could hit a record this year as the country reopens after lockdowns. The daily demand average could reach 800,000 bpd, Bloomberg reported, citing a survey among 11 consultants with a focus on China.

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By Irina Slav for Oilprice.com

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