Oil prices fell 8% last week to three-week lows
Oil prices rose slightly on Monday as signs of demand recovery in China, the world's largest oil importer, outweighed after falling 8% last week to three-week lows on concerns that slowing growth in major economies could limit fuel consumption.
Brent crude futures rose 19 cents, or 0.2%, at 0502 GMT to $80.13 a barrel, while West Texas Intermediate (WTI) crude futures climbed 9 cents, or 0.1% higher, to $73.48 a barrel.
Last Friday, WTI and Brent fell 3% after strong US jobs data raised concerns that the Federal Reserve would continue to raise interest rates, which boosted the dollar. A stronger dollar reduces the demand for dollar-denominated oil from buyers who usually pay in other currencies.
While recession fears dominated the market last week, International Energy Agency (IEA) Executive Director Fatih Birol on Sunday emphasized that the recovery in China continues to be a major driver for oil prices. The IEA expects half of global oil demand growth this year to come from China, which Birol says is increasing demand for jet fuel.
Birol said that depending on how strong the recovery is, the Organization of the Petroleum Exporting Countries (OPEC) and its allies may have to reassess their decision to cut production by 2 million barrels per day in 2023.
He drew attention to the importance that these countries should review their production policies in case the demand increases very strongly and the Chinese economy recovers.
But analysts say higher interest rates put limits on price increases, as they are likely to curtail economic growth while the demand is expected to increase.
While the mobility numbers are encouraging, there are also those who say there is no major evidence that China's domestic demand is reviving. As such, they complain that concerns about central banks' rate hike cycles and higher rates for longer interest rates remain the main impediment to oil prices.
Price caps on Russian products also came into effect on Sunday, after the Group of Seven (G7), the European Union, and Australia agreed on $45 a barrel for crude oil and $100 a barrel on other products traded at higher prices.
However, in this case, the market expects the countries rather than the group will increase imports of refined Russian crude, thus causing not much disruption in overall supply. Still, OPEC's continued restraint on supply will keep the market tight.
Saudi Arabia's energy minister also warned over the weekend that sanctions and insufficient investment in the energy sector could lead to energy supply shortages.
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