Adedapo Adesanya
By Adedapo Adesanya
Oil prices bounced back from early losses amid supply tightness and hope for rising Chinese demand, as Brent crude rose by 50 cents or 0.6 per cent to $86.33 per barrel, and US West Texas Intermediate (WTI) crude futures up by 94 cents or 1.2 per cent to $80.62 per barrel.
Earlier in the session, both benchmarks had declined by more than $1 per barrel after China on Sunday set a lower-than-expected 5 per cent gross domestic product (GDP) growth target for this year, down from last year’s 5.5 per cent target.
China’s GDP grew last year by only 3 per cent.
After digesting the disappointment, oil markets seem to have come to terms with the fact that last year, Chinese GDP expanded by only 3 per cent, putting this year’s expected 5 per cent into better perspective.
Also putting downward pressure on oil prices earlier on Monday were concerns in advance of testimony scheduled for later this week by US Federal Reserve Chairman Jerome Powell.
The US central bank helmsman will testify to Congress on Tuesday and Wednesday, and he is likely to be quizzed on whether larger increases were needed in the world’s biggest oil-consuming country.
Concerns about the level of an increase in oil demand sparked by a Chinese reopening have been contested with concerns about a future of tight supply.
Oil was supported by top crude exporter Saudi Arabia raising prices for the flagship Arab light crude it sells to Asia for a second month in April, as well as a weaker US Dollar.
This is the second consecutive month with higher prices for Saudi crude. Last month’s hike came as a surprise as it was the first time in six months that Aramco had hiked prices for its crude.
The March price hike also came amid falling crude oil prices on international markets, which was what made the move surprising, along with the fact that a month ago Aramco had reduced prices.
A weaker greenback makes dollar-denominated crude cheaper for foreign buyers and boosts demand.
The Dollar index bounced off a nine-month low of 100.80 in early February as strong data and still-high inflation leads investors to reprice for higher rates for longer. The index dropped 0.26 per cent on the day at 104.35.
