LONDON (Reuters) — Oil prices rose by 1% on Monday to $88.50 a barrel, extending last week’s gains on the back of a stronger outlook thanks to an expected economic recovery in top oil importer China this year.
Brent crude was up 84 cents, or 0.84%, at $88.37 a barrel at 1428 GMT, having earlier gained as much as $1 to its highest since Nov. 18. West Texas Intermediate (WTI) U.S. crude rose 46 cents, or 0.56%, to $82.10.
Last week Brent rose 2.8% while the U.S. benchmark logged a 1.8% gain.
Asian trading was slower because of the Lunar New Year holiday, but analysts said that optimism over China’s reopening is likely to drive oil prices higher.
Sukrit Vijayakar, director of Mumbai-based energy consultancy Trifecta, said the market wants to preserve long positions in case Chinese growth resumes.
Data shows a solid pick-up in travel in China after COVID-19 curbs were eased, ANZ commodity analysts said in a note, pointing out that road traffic congestion in the country’s 15 key cities so far this month is up 22% from the same period last year.
Crude oil prices in much of the world’s physical markets have started the year with a rally amid signs of more buying from China and concern that sanctions on Russia could tighten supply.
“While the (China) reopening itself will no doubt prove to be complicated, particularly over the holiday season, early indications suggest there has been a rise in activity, meaning the economy could perform better,” said OANDA analyst Craig Erlam.
Brent is expected to move back into a range between $90 and $100 as the oil market tightens, Erlam said.
The European Union and Group of Seven (G7) coalition will cap prices of Russian refined products from Feb. 5, in addition to the price cap on Russian crude in place since December and an EU embargo on imports of Russian crude by sea.
The G7 has agreed to delay a review of the level of the price cap on Russian oil to March, a month later than originally planned, to provide time to assess the impact of the oil products price cap.