Oil prices up after drone attack in Iran, China’s consumption recovery bid

Oil prices have climbed in
early Asia trade, supported by tensions in the Middle
East following a drone attack in Iran and as Beijing pledged
over the weekend to promote a consumption recovery which would
support fuel demand.

Brent crude futures rose 54 cents, or 0.6 percent, to
$87.20 a barrel by 0115 GMT while US West Texas Intermediate
crude was at $80.22 a barrel, up 54 cents, or 0.7 percent on Monday.

Israel appears to have been behind an overnight drone attack
on a military factory in Iran, a US official said on Sunday.

“It is not really clear yet what’s happening in Iran, but
any escalation there has the potential to disrupt crude flow,”
said Stefano Grasso, a senior portfolio manager at 8VantEdge in
Singapore.

Ministers from the Organization of the Petroleum Exporting
Countries (OPEC) and allies led by Russia, known collectively as
OPEC+, are unlikely to tweak its current oil output policy when
they meet virtually on February 1.

Still, indication of a rise in crude exports from Russia’s
Baltic ports in early February caused Brent and WTI to post
their first weekly loss in three last week.

China to boost imports

Meanwhile, China’s cabinet said on Saturday it would promote a
consumption recovery as the major driver of the economy and
boost imports, state broadcaster CCTV reported.

“We have Russia on the supply side and China on the demand
side. Both can swing by more than 1 million barrels per day
above or below expectation,” said Grasso, formerly an oil trader
with Italy’s Eni.

“China seems to have surprised the market in terms of how
fast they are coming out of zero Covid while Russia has
surprised in terms of resilience of export volume despite the
sanctions.”

China resumes business this week after its Lunar New Year
holidays.

The number of passengers travelling prior to the
holidays rose above levels in the past two years but is still
below 2019, Citi analysts said in a note, citing data from the
Ministry of Transport.

“Overall international traffic recovery remains gradual,
with high-single to low-teens digits to 2019 level, and we
expect further recovery when outbound tour group travel resumes
on Feb. 6,” the Citi note said.

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