Oil rallied at the start of the week amid optimism about China's demand recovery and gains in wider markets.
West Texas Intermediate futures surged above US$76 a barrel Monday, rebounding from last week's 8.1 per cent drop, as China issued a fresh batch of crude oil import quotas. A Chinese central bank official also said the nation's growth would be back on track soon as Beijing provides more financial support to households and companies, according to an interview with People's Daily, the Chinese Communist Party mouthpiece.
“China reopening remains the major bullish catalyst story out there,” said Keshav Lohiya, founder of consultant Oilytics. “We are generally on the oil bull side, but the price rise will not be a straight line as it was in 2004-2008.” The Federal Reserve may lean toward smaller interest-rate rises after wage growth cooled in December, another step down in its aggressive campaign of monetary tightening. That's put pressure on the U.S. dollar, which slipped again Monday, and added to tailwinds for commodities priced in the currency.
This week also marks the beginning of the annual rebalancing of the largest commodity indexes, a period usually characterized by volatile flows across raw materials markets. The period should see more than US$1 billion of inflows into the global Brent benchmark, while leading to outflows from WTI, according to separate estimates from Citigroup Inc. and Societe Generale SA. WTI for February delivery advanced 3.1 per cent to US$76.09 a barrel at 10:45 a.m. in London.
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