Oil prices rise on optimism about fuel demand in China

Oil prices rose on Monday, reversing losses as investors grew optimistic that holiday travel in China would boost fuel demand in the world’s largest oil importer.

Brent crude rose 1.06, or 1.3%, to $82.72 a barrel by 12:17 p.m. EDT (1717 GMT). U.S. West Texas Intermediate crude rose 95 cents, or 1.2%, at $78.82.

Last week, both contracts fell more than 5% for their first weekly declines in five as U.S. implied gasoline demand fell from a year earlier.

China’s bumpy economic recovery after the COVID-19 pandemic has clouded the oil demand outlook, though Chinese customs data on Friday showed record volumes of imports in March.

Bookings in China for trips abroad during the upcoming May Day holiday point to a continued recovery in travel to Asian countries, but the numbers remain far off pre-COVID levels with long-haul airfares soaring and not enough flights available.

“There’s a lot of optimism around Chinese holidays as it relates to jet fuel demand, the first genuine numbers on Chinese demand construction,” said Bob Yawger, director of energy futures at Mizuho.

Supply tightness owing to additional supply cuts planned by the OPEC+ producer group from May could also lift prices.

“Planned output cuts by the OPEC+ alliance and a strong demand outlook from China could provide a fillip to prices in the coming days”, said independent oil analyst Sugandha Sachdeva.

Iraq’s northern oil exports also showed few concrete signs of an imminent restart after a month of standstill, as aspects of an agreement between Baghdad and the Kurdistan Regional Government (KRG) have yet to be resolved, according to four sources.

Refining margins in Asia have weakened on record production from top refiners China and India, curbing the region’s appetite for Middle East supplies loading in June.