Oil prices slipped in early trade on Friday but were on track for gains of more than 6% for the week on solid signs of demand growth in top crude oil importer China and expectations of less aggressive interest rate hikes in the United States.
Brent crude futures fell 17 cents, or 0.2%, to $83.86 a barrel by 0119 GMT, while U.S. West Texas Intermediate (WTI) crude futures slipped 12 cents, or 0.2%, to $78.27.
Brent has jumped 6.7% so far this week and WTI is up 6.2%, recouping most of the previous week’s losses.
Analysts said recent Chinese crude purchases and a pick-up in road traffic fuelled confidence in a demand recovery in the world’s second-largest economy following the reopening of its borders and easing of COVID-19 curbs after protests last year.
“Given the focus on energy security, we anticipate that Chinese imports will continue to pick up, particularly as refinery runs ramp and stockpiling crude remains a strategic priority,” RBC commodity strategist Michael Tran said in a client note.
In another encouraging sign, ANZ analysts said a congestion index covering the 15 Chinese cities with the highest number of vehicle registrations had risen 31% from a week earlier.
“China’s road traffic levels are continuing to rebound from record low levels following the easing of COVID-19 restrictions,” the ANZ analysts said in a note. Oil prices have also been buoyed by a slide in the dollar to a nearly nine-month low after data showed U.S. inflation fell for the first time in 2-1/2 years, reinforcing expectations the Federal Reserve will slow the pace of rate hikes.
A weaker greenback tends to boost demand for oil as it makes the commodity cheaper for buyers holding other currencies.