By Charles Kennedy – January 09, 2023 1:00 PM CST
- After falling 8% last week, crude oil prices are trading up over 1.7% through midday Monday.
- The fall in oil prices over the past week was one of the biggest falls since 2016.
- A weaker dollar and higher expected demand from Chinese refiners are the key bullish drivers for Crude Oil today.
After falling 8% last week, crude oil prices are trading down over 1.7% as of Monday midday, on the back of China’s reopening and a weaker US dollar.
West Texas Intermediate (WTI) was trading up 1.84% as of 1:31 p.m. EST Monday, breaking through $75/barrel, while Brent was trading 1.55% higher, pushing towards $80 .
China’s reopening news was the main driver against recession fears that had grabbed all the attention last week. Less hawkish sentiment from the Fed combined with a weakening dollar also boosted oil prices.
The US dollar index fell 0.82% on Monday.
Gains are not as big as one might expect for a China reopening and do not appear set for a quick reversal of the 8% they previously lost as traders remain cautious about what happens next with the Chinese recovery.
It is still expected that COVID-19 cases will continue to rise and affect demand.
China’s reopening has prompted a surge in cases and traders have scaled back some optimism on the back of the latest Chinese manufacturing data, which showed activity in December fell for a third straight month. Other signs of a tough recovery include looming labor shortages and supply chain disruptions.
The fall in oil prices over the past week was one of the biggest falls since 2016.
Monday’s rebound in oil prices also comes as the US Department of Energy (DoE) tries to lure producers into selling oil at a bargain price – ideally $70/barrel – to replenish the Strategic Petroleum Reserve (SPR). Reports surfaced on Friday that the DoE had rejected the initial offers as unfavorable to taxpayers. As oil prices continue to rise, it will become increasingly difficult to replenish the SPR, which is at its lowest level since 1984.
By Charles Kennedy for Oilprice.com
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