Oil Sets on Hope in Chinese Demand, Post Weekly Gains

BENGALURU, March 3 (Reuters) – Oil prices recovered from a brief sell-off to rise more than $1 a barrel on Friday to finish the week higher, driven by renewed optimism around demand from China, the largest oil importer.

Brent crude oil futures rose $1.08, or 1.3%, to settle at $85.83 a barrel. US West Texas Intermediate (WTI) crude oil futures settled at $79.68 a barrel, up $1.52 or 1.9%. Both benchmarks posted their highest closing prices since February 13.

Prices fell more than $2 a barrel early after a media report said the UAE had held internal debates about leaving OPEC and pumping more oil. Prices bounced back when two sources with close knowledge told Reuters the report was “far from the truth”.

Brent and WTI posted their third-largest weekly percentage gains this year as strong Chinese economic data fueled hopes of oil demand growth.

“Crude oil is on a rollercoaster ride today, lower on rumors that the UAE was leaving OPEC+, before sharply reversing and shooting higher as this rumor was contested, and crude oil instead jumped on board the risk-on rally,” said Kpler analyst Matt Smith.

Service sector activity in China grew at its fastest pace in six months in February, and manufacturing activity there also grew. China’s overseas imports of Russian oil will hit a record high this month.

China, the world’s largest oil importer, is getting more ambitious with its 2023 growth target of 6%, sources told Reuters.

According to UBS analyst Giovanni Staunovo, the oil market has outperformed large US oil supplies for the 10th consecutive week (USOILC=ECI), and record US crude exports provided more support to prices.

The dollar weakened and analysts polled by Reuters expect the greenback to come under pressure over the next 12 months, making dollar-denominated oil cheaper for holders of other currencies. ,

The European Central Bank continued to issue aggressive signals, with ECB Governing Council member Pierre Wunsch saying its key interest rate could rise to 4% if inflation remains high.

Reporting by Shariq Khan Additional reporting by Shadia Nasralla, Sudarshan Varadhan and Muyu Xu; Montage by Kirsten Donovan, David Goodman, Louise Heavens, Paul Simao and David Gregorio

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