By Adedapo Adesanya
Crude oil continued its stellar performance on Friday as the US Dollar dropped to an almost nine-month low and more indicators pointed toward growing demand from top oil importer, China.
This raised the Brent crude futures by $1.25 or 1.5 per cent to settle at $85.28 a barrel, while the US West Texas Intermediate (WTI) crude futures rose for the seventh-straight session by $1.47 or 1.9 per cent to $79.86 a barrel.
This made them notch their biggest weekly gains since October. Brent gained 8.6 per cent this week, while WTI rose by 8.4 per cent, recouping most of the previous week’s losses.
The US Dollar index tumbled to a nearly nine-month low after data showed US inflation was easing, prompting bets that the Federal Reserve will be less aggressive with rate hikes going forward.
US data showed the consumer price index (CPI) dipped 0.1 per cent last month, marking the first decline in the data since May 2020, when the economy was reeling from the first wave of COVID-19 infections.
Price pressures are subsiding as the US central bank’s fastest monetary policy tightening cycle since the 1980s dampens demand and eases supply chains.
A weaker greenback tends to boost demand for oil, making it cheaper for buyers holding other currencies.
Recent Chinese crude purchases and a pick-up in road traffic in the country are also fuelling hopes of a demand recovery in the world’s second-largest economy.
This follows the reopening of its borders and easing of COVID-19 curbs after three years following heavy protests last year.
Market analysts note that the next thing to watch is if this also translates into higher Chinese crude imports and if energy agencies like the International Energy Agency (IEA) and the Organisation of the Petroleum Exporting Countries (OPEC) revise their (first-quarter) demand estimates upwards.
China’s oil consumption is expected to jump by 800,000 barrels per day this year to a record 16 million barrels per day.
Chinese oil demand is set to rebound from the second quarter onwards, also raising global oil demand for this year, many analysts say.
OPEC and allies, including Russia, known as OPEC+, will meet in February to assess market conditions, and there is some concern that the group could cut oil output again to lift prices after recent declines.
OPEC+ had announced a 2-million-barrel-per-day cut to production in October as global oil prices fell under $90 a barrel.
The total number of total active drilling rigs in the United States rose by three this week, according to new data from Baker Hughes published on Friday.
Dipo Olowookere