NEW YORK: Oil prices rose more than 1 percent on Monday, supported by optimism about Chinese demand, continued production cuts by major producers and Russia’s plans to curb supply.
Brent oil was down $1.07, or 1.3 percent, at $84.07 a barrel. US West Texas Intermediate Crude Oil (WTI) for March, which ends on Tuesday, last rose 85 cents, or 1.1 percent, to $77.19.
Volumes were limited on Monday due to a holiday in the US market for Presidents’ Day.
Both crude oil benchmarks came in lower by $2 on Friday before falling about 4 percent in the week after the United States reported higher crude oil and gasoline inventories.
Analysts expect Chinese oil imports to reach a record high in 2023 to meet increased demand for transportation fuel and as new refineries come on stream.
“The optimism surrounding China today may be responsible for the gains we are seeing in crude oil, which would make a lot of sense given that it is the world’s largest importer and is expected to recover strongly from the COVID transition,” said Craig Erlam, senior market analyst. at OANDA in London.
China and India have become major buyers of Russian crude amid Western sanctions on Russian oil and more recently embargoes and price caps due to the war in Ukraine.
In India, the world’s third largest oil importer, crude oil imports rose to their highest level in six months in January, government data showed.
China’s Commerce Ministry has met with independent oil refiners to discuss their deals with Russia, according to five knowledgeable sources, imports that have saved Chinese buyers billions of dollars.
“The government wants to understand how much independent refiners could potentially buy and their actual need for such imports,” said a source with direct knowledge of the discussions.
Russia plans to cut oil production by 500,000 barrels per day (bpd) in March, representing about 5 percent of its production, after the West imposed price caps on Russian oil and oil products.
Russia is part of the OPEC+ producer group, made up of the Organization of the Petroleum Exporting Countries (OPEC) and allies, who agreed in October to cut oil production targets by 2 million barrels per day through the end of 2023.
Future shortfalls in oil supplies are likely to push prices toward $100 a barrel by the end of the year, Goldman Sachs analysts said in a Feb. 19 note.
Prices will rise “as the market rolls back into deficit with underinvestment, shale constraints and OPEC discipline to ensure supply does not meet demand,” they wrote.