Oil prices climbed on Monday after the People’s Bank of China (PBOC) rolled over policy loans to support the world’s second-largest economy weighed by the COVID-19 pandemic, raising the prospect of a stronger fuel demand outlook from China.
Global benchmark Brent crude futures added 0.34% to $91.94 per barrel, having lost 6.4% in the previous week. The US West Texas Intermediate (WTI) crude futures were up 0.32% to $84.91 per barrel after falling 7.6% last week.
Prospect of China’s Fuel Demand Recovery Strengthens
The PBOC fully rolled over its maturing medium-term lending facility (MLF) while maintaining its interest rate for the second straight month on Monday, keeping the possibility that monetary policy will remain loose to aid the pandemic-stricken economy.
China’s central bank stated that the interest rate on the CN¥500 billion worth of one-year MLF was unchanged at 2.75%.
A full rollover pointed to a continued loose monetary policy from the PBOC, according to analysts.
A senior official of the National Energy Administration (NEA) said the world’s biggest crude importer also plans to significantly boost domestic energy supply capacity and strengthen risk measures in critical commodities, including coal, oil, gas, and electricity.
Furthermore, another state official stated that China aims to further increase reserve capacities for key commodities.
Adding support to oil prices was Chinese President Xi Jinping’s comments that guaranteed accommodative policies for the economy, providing some optimism for future demand.
China is due to publish trade and economic data this week. While its gross domestic product (GDP) for the third quarter could show recovery from the past quarter, strict pandemic restrictions may set up the world’s second-largest economy for what could be its worst-performing year in nearly half a century.
Moving forward, oil prices are expected to stay volatile as output cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies will squeeze supplies ahead of the European Union’s (EU) ban on Russian crude oil.
Meanwhile, a higher US dollar and more interest rate hikes from the Federal Reserve are expected to curb price gains.
