Oil Prices Rise for the Second Consecutive Week, Strengthened by Chinese Demand

Oil prices rose on global markets last week for the second consecutive week, as traders expect an increase in Chinese demand, while concerns about recession in Western economies took a back seat.

The price of a barrel on the London market rose by 2.8 percent last week to $87.63, while on the American market, the barrel increased by 1.8 percent to $81.30.

The rise in prices for the second consecutive week is primarily attributed to expectations that, following the lifting of strict COVID measures, the growth of the Chinese economy will accelerate. This will also boost demand for oil, given that China is the world’s largest importer of ‘black gold’.

The International Energy Agency (IEA) forecasts that, thanks to China, global oil demand this year will reach a record 101.7 million barrels per day, and the Organization of the Petroleum Exporting Countries (OPEC) also expects a recovery in China.

– Many traders believe we will witness stronger demand from China, as it lifts COVID measures day by day – said Naeem Aslam from Avatrade.

Oil prices are also supported by hopes that the U.S. central bank will not raise interest rates to the high levels expected by Fed leaders. Indeed, most Fed leaders have recently indicated that key interest rates will need to be increased above 5 percent to curb inflation.

However, traders in the money market estimate that the final interest rate at which the Fed would stop the cycle of increases could be 4.89 percent. Additionally, traders hope that the U.S. economy will avoid recession.

– The chances are increasing that the U.S. economy will only slow down slightly – said Fed Vice Chair Lael Brainard last week.

Support for prices is also provided by the decline in the value of the dollar against a basket of currencies. The dollar index, which shows the movement of the value of the U.S. dollar against the other six major world currencies, has fallen by 1.4 percent since the beginning of the year, reaching its lowest levels since June of last year. This supports demand as the weakening dollar enhances the purchasing power of those buying oil in other currencies.