Oil prices rose on Thursday, on an increased oil demand outlook and WTI price climbed to $79 per barrel. If the WTI price declines, it may encounter support near $70.2 per barrel, while resistance may be found near $81.4 per barrel.
Hopes of global economic recovery boosted oil prices on Thursday. The highly-anticipated US inflation report on Thursday showed that US inflation seems to be cooling, which may give the US Federal Reserve some leeway toward scaling back its interest rate increases. US headline inflation dropped to 6.5% year-on-year in December from 7.1% in November. A soft inflation print on Thursday reduced Fed rate hike expectations, boosting oil prices.
Aggressive rate hikes stifle economic activity fuelling recession fears. Several major Central Banks, such as the US Federal Reserve, the ECB, and the BOE raised interest rates significantly over the past year, reducing the oil demand outlook. As inflation starts to cool though, central banks are starting to lower the pace of rate hikes, raising oil demand expectations.
Increased optimism about China’s economic reopening is also providing support for oil prices. China opened its borders this week, fuelling hopes that the country is gradually ending its strict Covid policy. China is the world’s largest energy importer and prolonged lockdowns have dampened oil demand. The Chinese government eased some of its strident Covid regulations recently, abandoning its zero-Covid policy. China’s economy, however, has suffered from prolonged lockdowns and the country’s debt has ballooned over the past few years. China’s weak economy is raising concerns over the demand outlook for oil, pushing prices down.
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