Crude started to slow down, however, there was positive activity on Monday, despite China’s celebration of the Lunar New Year. This officially shuts the nation completely for one week, with factories and companies likely remaining closed for longer.
Crude and other commodities experience both apprehension and enthusiasm over the Chinese holiday. During this time, oil and raw material consumption normally decreases, producing a temporary dip in demand in the world’s top importer of crude and the majority of other commodities.
As soon as operations resume, Chinese enterprises frequently experience acceleration that make up for their decreased consumption over the holidays. This is the expectation of oil bulls, who anticipate that China’s crude oil consumption would surge beginning in February, bolstering last week’s gains on both WTI and Brent.
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Some are afraid that China’s tone after the new year might alter this year, owing to its ongoing coronavirus outbreak, despite the optimism. Health experts anticipate significant increases in Covid cases after the holidays.
Chinese citizens will be able to freely travel and interact with one another after three years, as a result of Beijing’s decision to remove restrictions regarding Covid infections.
China’s Ministry of Transport anticipates that nearly 2 billion passenger journeys would occur over the 40-day Lunar New Year season, during which people travel to distant hometowns for reunions. If accurate, this is good news for gasoline demand.
As oil demand in Asia surges, Russian crude dispatches from Baltic harbors are on course for a 50% jump from December through January, according to Reuters. Especially Russian Urals and KEBCO crudes from the ports of Primorsk and Ust-Luga.
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Reuters added that the bulk of these shippings (some 70%) will travel to India. Russia currently supplies around 25% of India’s crude demands. This is another method by which Russian oil continues to enter the United States. The United States is a significant purchaser of Russian crude oil processed by Indian refineries, particularly VGO–virgin gas oil.
West Texas Intermediate, or WTI, March futures traded up 0.6%, to $82.11 a barrel following a 2% increase in the previous week. However nearing the close of the session, WTI stays flat at $81.6. WTI reached a one-year low of $70.11 in early December, compared to Monday’s session high of $82.62.
Brent crude futures for March rose 1%, to $88.50, following a 2.8% increase last week. Nearing the session close, it managed to stay above $88 with a 0.4% gain. Brent reached a session high of $89.08 on Monday, after reaching a one-year low of $75.11 in December.
WTI could start attacking the $83 again by the bulls this week, however in a narrow range, possibly $80-$83.
WTI 1D chart, source: tradingview.com, author’s analysis