Oil reversed five days of losses yesterday as China overtook the United States as the world's biggest crude importer and revealed further economic stimulus plans.
China's incoming leadership will focus on growing the economy, firming a trend towards increasing oil imports that has resulted in the country overtaking the US as the world's biggest net importer, and will support oil prices this year.
A shaky global recovery will prompt China's new leaders to invest massively in infrastructure and the domestic economy, said Wen Jiabao, the outgoing premier, in his final report to the National People's Congress.
"In the current stage, the role investment plays in promoting economic growth cannot be underestimated," Mr Wen told 3,000 party delegates in Beijing yesterday.
The new government, which is led by the premier Li Keqiang and the president Xi Jinping, will oversee the opening of more than 5,200 kilometres of railway line, and the construction of 80,000km of highway, according to a report by the National Development and Reform Commission. Growth will be further stimulated by domestic demand, as Beijing targets retail sales growth of 14.5 per cent this year. Fixed-asset investments are projected to rise 18 per cent.
Mr Wen's speech was well received by the oil market. Brent, the benchmark for the global crude trade, reversed five days of losses, gaining 0.58 per cent to reach US$110.73 a barrel in trading yesterday. West Texas Intermediate also rose in New York trading.
"Chinese oil demand is likely to continue recovering in 2013 following a weak 2012, especially with the new leadership committing to more fiscal stimulus," said Amrita Sen, the chief oil analyst at Energy Aspects. "The recovery in Chinese demand poses the biggest upside risk to oil demand and prices, especially given that macro concerns about China and Europe was the biggest cap on oil price upside."
The focus on inward investment is aimed at seeing off "social problems" arising from uneven and unsustainable development.
"We are keenly aware that we still face many difficulties and problems," said Mr Wen.
China's overall economic growth target for this year is 7.5 per cent, unchanged from last year. Continued growth and the resulting thirst for oil will be a boon for Arabian Gulf oil producers, including the UAE. Ties between China and the Arab world are deepening, and Chinese companies are increasingly common in the region's oil sector.
Last year, Mr Wen signed a memorandum of understanding in Abu Dhabi to explore large tracts of the emirate for oil, and Chinese National Petroleum Corporation belatedly completed a pipeline that connects the onshore fields with the Gulf of Oman.
Comment, b4
UAE lenders are keen to capitalise on the increasing trade into Asia. "Our focus is on Asia and the oil business and the trade flows of the oil business," First Gulf Bank's chief financial officer Karim Karoui said last month.
National Bank of Abu Dhabi has already increased the trade it finances between the emirates and the emerging Asian markets, said Michael Tomalin, the bank's chief executive.
Chinese banks are expanding their presence in the Gulf to facilitate the oil trade.
Industrial and Commercial Bank of China, the world's biggest bank, is expanding to Saudi Arabia and Kuwait, building on its existing operations in the UAE and Qatar.
China's position as the world's top oil importer is confirmed by official data from both Beijing and the US.
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