The week began with gains in crude oil prices after China opened its borders. This encouraged optimism that China was finally coming out of Covid-related self isolation.
This optimism drove Brent crude and West Texas Intermediate higher by more than a percentage today in morning Asian trade, but both were still below $80 per bar at the time.
A Phillip Future analyst said that crude oil prices have recovered from previous week’s losses due to the economic reopening of China and less aggressive monetary tightening perspectives from the Federal Reserve. This set a positive tone in demand recovery, Reuters reported.
Others have issued bullish outlooks on oil prices for the entire year. John LaForge, head of global real assets strategy at Wells Fargo, stated that energy is the most popular commodity sector and believes oil prices will be a positive year. He also said that he likes energy and thinks there are strategic opportunities in large oil-producing nations.
China’s opening continues to be the major bullish factor in oil. However, the main bearish factor is the fear of recession. The EU’s core inflation hit a record high at 2022 and the Fed continues its aggressive inflation-taming strategy.
According to Bernard Weinstein, an energy economist who spoke to TheStreet, if there is a recession in enough countries, oil prices could drop to $60 per barrel if that happens.
OPEC+, however, is monitoring the oil market closely and is ready to adjust production to prevent this from happening again. The cartel still expects higher oil demand this year, according to its most recent monthly oil market report.
Oil prices started the new year in a slump, as traders concentrated on China’s Covid developments.