NEW YORK: Oil prices rose about 1% on Wednesday to their highest since early December on a drop in the US dollar and optimism that the lifting of China's strict COVID-19 curbs will lead to a fuel demand recovery in the world's top oil importer.
Brent futures rose 72 cents, or 0.8%, to $86.64 a barrel by 11:46 a.m. EST (1646 GMT), while US West Texas Intermediate (WTI) crude rose 94 cents, or 1.2%, to $81.12.
That put both benchmarks on track for their highest closes since Dec. 1.
The rise left WTI up for a ninth session in a row for the first time since January 2019 and pushed the contract into technically overbought territory for the first time since October 2022.
China's economic growth slowed sharply to 3% in 2022, missing the official target of "around 5.5%" and marking its second-worst performance since 1976.
But the data still beat analysts' forecasts after China started rolling back its zero-COVID policy in early December. Analysts polled by Reuters expect growth to rebound to 4.9% this year.
The lifting of COVID-19 restrictions in China is set to boost global oil demand to a record high this year, according to the International Energy Agency (IEA), while price cap sanctions on Russia could dent supply.
Rystad Energy, a consultancy, said the effect of sanctions on Russian crude exports after 1.5 months of the European Union embargo and G7 price cap has not been as devastating as some industry players predicted.
Oil prices hit two-week highs on hopes of China demand rebound
Rystad said the losses were at about 500,000 barrels per day and that India and China remain key buyers of Russian crude.
Referring to China, PVM analyst Stephen Brennock said that "no other single entity will play a more significant role in shaping oil balances over the coming months."
Analysts expect a drawdown in US crude stocks of about 1.8 million barrels in the week to Jan. 13, a Reuters poll showed, providing further price support.
The poll was conducted ahead of reports from the American Petroleum Institute (API) at 4:30 p.m. EST (2130 GMT) on Wednesday.
A report showing US retail sales fell more than expected in December provided some counterintuitive support for oil prices.
That's because the broad drop in sales, together with subsiding inflation, are likely to encourage the US Federal Reserve (Fed) to further scale back the pace of its interest rate increases next month.
The Fed uses higher interest rates to reduce inflation. But those higher rates also make it more expensive for businesses and consumers to borrow money, slowing economic growth.
The weak US economic data also caused the dollar to drop to its lowest since June against a basket of other currencies.
A weaker dollar can boost demand for oil, as dollar-denominated commodities become cheaper for holders of other currencies.
In other parts of the world, Germany is expected to narrowly avoid recession this year and Japan is nearing the phase where its monetary policy easing can be stopped, but Taiwan's trade-dependent economy unexpectedly contracted in the fourth quarter.
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