Oil prices hit 7-week high on stronger Chinese outlook

NEW YORK, Jan 23 (Reuters) – Oil prices rose around 1% on Monday to a seven-week high, extending last week’s gains amid a stronger outlook thanks to an expected economic recovery in China , the largest oil importer this year.

Brent crude rose $1.12, or 1.3%, to $88.75 a barrel as of 1:14 p.m. EST (6:14 p.m. GMT). The session high was $89.09 a barrel, the highest since Dec. 1.

U.S. West Texas Intermediate (WTI) crude rose 72 cents, or 0.9%, to $82.36. The session high was $82.64 a barrel, the highest since Dec. 5.

Asian trading was slower due to the Lunar New Year holiday, but analysts said optimism about China’s reopening should push oil prices higher.

Sukrit Vijayakar, director of Mumbai-based energy consultancy Trifecta, said the market was keen to hold on to long positions in case Chinese growth picked up.

Data shows a strong recovery in China travel after COVID-19 restrictions eased, ANZ commodity analysts said in a note, noting road traffic congestion in the country’s 15 key cities country so far this month is up 22% from the same period last year.

Crude oil prices in most physical markets around the world started the year with a rally as China showed signs of additional buying and traders worried that sanctions against Russia could tighten supply.

“While the reopening (of China) itself will no doubt prove complicated, particularly over the festive period, early indications suggest that there has been an increase in activity, which means that the economy could perform better,” said OANDA analyst Craig Erlam.

Brent should return to a range between $90 and $100 as the oil market tightens, Erlam said.

Commodity demand has pushed up the oil market and refining margins, according to Price Futures analyst Phil Flynn. The crack 3-2-1 spread, an indicator of refining margins, hit $42.05 a barrel on Friday, the highest since October.

The European Union and the Group of Seven (G7) coalition will cap prices on Russian refined products from February 5, in addition to the price cap on Russian crude in place since December and an EU embargo on imports of Russian crude by sea.

The G7 agreed to postpone a review of the level of the Russian oil price cap until March, a month later than originally planned, to allow time to assess the impact of the price cap on petroleum products.

India’s crude oil imports hit a five-month high in December, government data showed on Monday, as refiners stocked up on cut-price Russian fuel amid steadily rising consumption in the country.

Reporting by Stephanie Kelly in New York; additional reporting by Ron Bousso in London, Mohi Narayan in New Delhi and Sonali Paul in Melbourne Editing by David Goodman, David Gregorio and Mark Potter

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