During the Wednesday session, oil prices turned higher and reached their highest level since the start of December. For now, there's hope that the Chinese economy will go toward full recovery after lifting the COVID-19 restrictions.
Considering China is among the top oil importers in the world, it is only natural for the oil to gain ground due to this positive news.
As a result of this positive news, brent crude futures advanced by 1.41% ($1.21) and reached a price of $87.13/barrel. Similarly, the WTI crude futures advanced by 1.7% ($1.36) and touched $81.54/barrel. Both of these benchmark indices are at their highest levels since the start of December 2022.
In 2022, the economic growth of China slowed down significantly to only 3%. However, the officials were expecting a 5.5% growth target. This led analysts to call the Chinese economic performance in 2022 one of the worst since 1976!
But now that China is slowly rolling back its strict COVID policy, the data suggests strong growth in the Chinese economy once again. According to a poll of analysts, there's a high chance that China's GDP growth will hit 4.9% in 2023.
Considering the strong rebound in the Chinese economy, oil prices have started to rise once again. Recently, the IEA also made it clear that the Russian oil price cap will dent the oil supply around the world.
Similarly, OPEC is also expecting the Chinese oil demand to increase by 510,000 BPD. That's the first time we have seen an increase in oil consumption by China after the strict COVID measures.
According to Stephen Brennock (analyst at PVM), China will play a major role in the oil market during the next few months.
And last but not least, the US crude stock is also expected to go through a drawdown in the next few weeks. So even that development is lending support to the oil prices.