The Brent crude oil ICE EU price rose by 5.97% week-on-week (w-o-w) to USD 84.66/barrel, as of 16th January, following the removal of COVID-19 restrictions in China as the country reopens. Air and rail travel demand in China is set to climb due to the recent reopening of its border.
At least for the remainder of January, the outlook is bullish for the crude oil price because more people will be travelling ahead of the Chinese New Year, supporting demand in the short term. However, there is always the possibility that elevated COVID-19 cases in China will lead the government to lock down major cities again, potentially leading to a sharp fall in oil demand.
In the US, the Consumer Price Index (CPI) for December 2022, which tracks the average price of consumer goods, declined by 0.1% month-on-month (m-o-m) to 6.5%. This may be the first indication that central banks are beginning to have some success in reigning in rampant inflation. Over the longer term, this could stir greater demand for oil on the prospect of an economic recovery. Despite the prospect of an economic recovery, however, inflation remains at relatively high levels, and the prospect of a global recession in the coming months, which would lead to a collapse in the oil price, cannot be ruled out.