Brent futures start off the Spring Festival week on high note

Front-month ICE Brent has increased by $0.64/bbl on the day from Friday, to $87.54/bbl at 09.00 GMT.

PHOTO: People enjoy lanterns set to celebrate the Spring Festival at the Baotu Spring in Jinan, east China's Shandong Province. Xinhua

Upward pressure:

China’s Spring Festival and Lunar New Year celebrations are reviving hopes of an oil demand surge, giving Brent a second wind after the pandemic outbreak.

“China’s Unipec bought as many as 18 shipments for March delivery, as China’s reopening boosts demand. So far in January, traffic congestion in China’s 15 key cities is 21.6% higher than January 2022 levels,” says ANZ strategist Daniel Hynes.

Meanwhile, concerns about declining Russian oil production are intensifying as more sanctions will be imposed on the country from 5 February. “Existing sanctions may already have discouraged some purchases, with China’s crude imports from Russia down 17% on the month, to 6.47 million mt in December,” adds Hynes.

The International Energy Agency’s executive director Fatih Birol has warned that energy markets could tighten this year if the Chinese economy recovers sharply, and if Russian oil exports continue to decline.

Downward pressure:

Chinese GDP grew by just 3% in 2022, according to official figures from China’s National Bureau of Statistics (NBS). That was well below the government's target of 5.5%.

CNN has quoted NBS director Kang Yi saying, “The triple pressures of demand contraction, supply shocks, and weakening expectations [in China] continue to evolve, and the complexity, severity, and uncertainty of the environment are increasing.”

The International Monetary Fund’s managing director Kristalina Georgieva has urged caution this year, arguing that the global economy is still in poor shape. Moreover, she has warned that an invigorated Chinese economy might exacerbate global inflation.

By Konica Bhatt

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