NEW YORK (Reuters) – Oil prices rose on Monday, as optimism about China easing restrictions imposed on the emerging coronavirus (Covid-19) outweighed fears of a global recession that would affect energy demand.
China, the world’s largest importer of crude oil, is seeing the first of three expected waves of COVID-19 cases after Beijing eased movement restrictions but said it plans to increase its support for the economy in 2023.
“There is no doubt that demand is negatively affected,” said Naeem Aslam, an analyst at AvaTrade Brokerage. “However, not everything is negative as China has vowed to fight all pessimism about its economy and will do what it takes to boost economic growth.”
Brent crude rose 96 cents to $80.00 a barrel by 12:56 PM ET (1756 GMT), while US West Texas Intermediate crude rose $1.23 to $75.52.
Prices pared earlier gains before rising again in a volatile session.
“The reality here is that we still have fear of a looming major recession that has not gone away,” said Bob Yawger, director of energy futures at Mizuho. It will be hard to make big gains here.
Oil rose towards a record high of $147 a barrel earlier in the year after Russia’s invasion of Ukraine in February. It has since erased most of this year’s gains as supply concerns faded due to recession fears.
European Union energy ministers approved a gas price cap on Monday, after weeks of talks over the emergency measure that has divided opinion among EU nations as it seeks to tame an energy crisis.
Cap can run starting February 23rd. 15 2023, the document showing the details of the final deal was shown. The deal will be formally approved by the states in writing, after which it can go into effect.
The US Federal Reserve and the European Central Bank raised interest rates last week and promised more. Meanwhile, the Bank of Japan could change its hawkish stance when it meets on Monday and Tuesday.
“The prospect of higher interest rates will hurt economic growth in the new year, thereby reducing demand for oil,” said Stephen Brennock of PVM Oil Brokerage.
Oil received a boost from the US Department of Energy saying on Friday it would start buying back crude for the Strategic Petroleum Reserve – the first purchases since the release of 180 million barrels of reserves this year.
(Reporting by Stephanie Kelly) Additional reporting by Alex Lawler. Editing by David Goodman, Barbara Lewis, Andrea Ricci, Deepa Babbington and Mark Porter
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