Oil Set for Yearly Gain as Investors Look Ahead to China Rebound

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(Bloomberg) — Oil is set to end a volatile year modestly higher as investors look ahead to an expected rebound in Chinese demand next year and brace for the possibility that less Russian crude will make it to buyers.

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West Texas Intermediate futures rose toward $79 a barrel in the final session of 2022 and are up almost 5% for the year. China is currently tackling surging virus cases and fears are mounting about a fresh global outbreak, but there’s optimism demand will eventually rebound in the world’s top crude importer.

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Traders are also watching for further reaction from Russia to sanctions on its energy exports following the war in Ukraine. An export ban on the OPEC+ producer’s refined petroleum products will take effect early next year.

“In the short term, there are demand and supply concerns, both of which are unlikely to dissipate soon and may lead to more price swings,” said Ravindra Rao, head of commodities research at Kotak Securities Ltd. in Mumbai. Once Covid cases in China start to drop, demand will increase, he added.

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Crude rallied earlier this year after the Russian invasion upended energy flows before pulling back on mounting concerns over a global economic slowdown. A raft of major central banks also tightened monetary policy to tackle rampant inflation, weighing on the demand outlook in 2022.

TC Energy Corp. restarted the ruptured segment of its Keystone oil pipeline following a spill that forced the conduit to shut for more than three weeks. Meanwhile, US commercial crude inventories rose by 718,000 barrels last week, according to data from the Energy Information Administration.

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