(New York) Oil prices ended sharply higher on Tuesday, supported by the welcome slowdown in US inflation and China’s rapid reopening, leaving investors more optimistic about the country’s demand.
A barrel of Brent North Sea oil for February delivery gained 3.44% to $80.68.
Its American equivalent, a barrel of West Texas Intermediate (WTI), for delivery in January, rose 3.03% to 75.39 dollars.
“Prices were boosted by the US Inflation Report which supports speculation that the US economy could experience a soft landing,” said Edward Moya, an analyst at Oanda.
US inflation in November slowed to 7.1% year on year from 7.7% a month ago while analysts were betting on 7.3%. This data has been supportive for crude prices, because if the US economy manages to avoid a recession due to rate hikes, energy demand will benefit.
The rise in prices also took place against a backdrop of further easing of health restrictions in China.
Beijing announced on Wednesday major relaxations to its strict “zero COVID-19” health policy, including the end of large-scale confinements, and the end of the systematic placement of people who tested positive in quarantine centers.
The country also announced on Monday the shutdown of the main anti-COVID-19 travel tracking app, used to check whether residents have passed through an affected area. Hong Kong made a similar statement on Tuesday.
“China continues to open up at a rapid pace,” commented analysts at Oilytics.
Analysts have indeed noted a jump in Chinese domestic flights, but also international with the removal of a three-day monitoring period for arrivals in Hong Kong.
In addition, OPEC maintained its oil demand growth forecast for 2022 and 2023, despite the recent slowdown in activity in China.
The global oil demand growth forecast for 2022 “remains unchanged at 2.5 million barrels per day” (mb/d), OPEC said in its December report.
Furthermore, “the threat of a drop in Russian production in response to the price cap by the G7” was another factor supporting prices, pointed out Craig Erlam of Oanda.
Especially since on the supply side, a leak from the Keystone pipeline in the United States forced the Canadian company TC Energy, which operates the infrastructure, to urgently stop the flow of hydrocarbons in the pipe.
The pipeline typically transports about 600,000 barrels per day of oil from the Canadian province of Alberta to several destinations in the United States.