February 06, 2023 (MLN): Oil prices surged in early trade on Monday after falling around 8% to more than three-week lows last week due to jitters about major economies and signs of a rebound in China, the world's largest oil importer, as per Reuters.
US West Texas Intermediate (WTI) crude futures moved up by 15 cents (0.2%) to 73.54 per barrel, while Brent crude futures soared by 16 cents (0.2%) to $80.10 a barrel.
Oil prices slumped 3pc on Friday following strong US jobs data that raised concerns the Federal Reserve would keep raising interest rates. The dollar rose as a result.
“While recession fears dominated the market last week, on Sunday International Energy Agency (IEA) Executive Director Fatih Birol highlighted that China’s recovery remains a key driver for oil prices”, Reuters noted.
Furthermore, the IEA expects half of global oil demand growth this year will come from China, where Birol said jet fuel demand was surging.
“Depending on how strong that recovery is, the Organization of Petroleum Exporting Countries (OPEC) and allies, together called OPEC+, may have to reassess their decision to cut output by two million barrels per day through 2023”, he added.
Price caps on Russian products took effect on Sunday, with the Group of Seven (G7), the European Union and Australia agreeing on caps of $100 per barrel on diesel and other products that trade at a premium to crude, and $45 per barrel for products that trade at a discount, such as fuel oil.
Moreover, ANZ analyst said, “For the moment, the market expects non-EU countries will increase imports of refined Russian crude, thus creating little disruption to overall supplies.”
“Nevertheless, OPEC’s continued constraint on supply should keep the market tight,” they said.
