Optimism about China's demand for oil was tempered by caution ahead of upcoming inflation data from the United States.
China's Reopening Boosts Demand
Top oil importer China is reopening its economy after the end of strict COVID-19 curbs, boosting optimism that demand for fuel will grow in 2023. Industrial output is expected to have increased by 3.6% in 2022 from the previous year, despite production and logistics disruptions from COVID-19 curbs.
"There is continued optimism in the oil market fuelled by China's reopening, and as Chinese New Year approaches, increased travels should support gasoline and jet fuel demand,"
said Serena Huang, head of APAC analysis at Vortex.
US Inflation and Russian Sanctions
Upcoming US inflation data is a crucial risk factor for oil, leading traders to become cautious ahead of the data release. Economists expect the rise in core US consumer prices to slow to an annual pace of 5.7% in December versus 6% a month earlier. The market is also bracing for additional curbs aimed at Russian fuel products sales set to come into force in February as the European Union (EU) keeps working on more sanctions against Moscow over the invasion of Ukraine.