Oil prices rise on China demand

Oil prices rose on Monday after tumbling by more than $2 a barrel in the previous session as optimism over the Chinese economy outweighed concern over a global recession.

China, the world's top crude oil importer, is experiencing its first of three expected waves of Covid-19 cases after Beijing relaxed mobility restrictions but plans to step up support for the economy in 2023.

Despite a surge in Covid cases, optimism over the reopening of the Chinese economy and its accommodative policy improve oil's demand outlook, said CMC Markets analyst Tina Teng.

Brent crude gained 82 cents, or 1 per cent, to $79.86 a barrel by 0925 GMT while US West Texas Intermediate crude advanced by 60 cents, or 0.8 per cent, to $74.89.

China's end to its zero-Covid policy is breathing life into its aviation sector, with average jet fuel demand jumping by 75 per cent in two weeks, according to satellite data company Kayrros.

Oil surged towards its record high of $147 a barrel earlier in the year after Russia invaded Ukraine but has since unwound most of this year's gains as supply concerns were edged out by recession fears, which remain a drag on prices.

The US Federal Reserve and European Central Bank raised interest rates last week and promised more. The Bank of Japan, meanwhile, could shift its ultra-dovish stance when it meets on Monday and Tuesday.

"The prospect of further rate rises will hit economic growth in the New Year and in doing so curb demand for oil," said Stephen Brennock of oil broker PVM.

Oil was also supported the US Energy Department saying on Friday that it will begin repurchasing crude for the Strategic Petroleum Reserve - the first purchases since releasing a record 180 million barrels from the reserve this year.