Oil prices drop, but China's economic outlook keeps them steady

23 Jan 2023 , 09:53 AM

Oil prices see a dip in Monday’s early trade as the Lunar New Year holiday in East Asia reduces demand, but remain steady thanks to anticipation of China’s economic recovery driving increased oil import.

Brent crude futures dropped 0.5% to $87.17, while WTI crude futures decline 0.5% to $81.24 per barrel.

ANZ commodity analysts report a significant increase in travel in China as COVID-19 restrictions are lifted, with a 22% rise in road traffic congestion in the country’s 15 major cities this month compared to last year.

Fatih Birol, the head of the International Energy Agency, said on Friday that if the Chinese economy recovers as expected by financial institutions, energy markets could tighten this year.

The increase in traffic in China ahead of the Lunar New Year holiday bodes well for fuel demand following the two-week vacation.

The European Union and the Group of Seven (G7) coalition will cap Russian refined product prices beginning February 5, in addition to the price cap on Russian crude in place since December and an EU embargo on Russian crude imports by sea.

The G7 has agreed to postpone a review of the level of the Russian oil price cap until March, a month later than planned, to allow time to assess the impact of the oil product price caps.

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