Oil prices rose on Tuesday as investors were encouraged by China's pledges to stabilise its economy next year.
Brent, the benchmark for two-thirds of the world’s oil, was trading nearly 1 per cent higher at $80.54 a barrel at 2.25pm UAE time.
West Texas Intermediate, the gauge that tracks US crude, was up 1.1 per cent at $75.98 a barrel.
China, the world's second-largest economy and top crude importer, will focus on boosting domestic demand by prioritising the recovery and expansion of consumption, officials said at the annual budget-setting Central Economic Work Conference last week, state news agency Xinhua reported.
"We have the confidence, conditions and capacity to turn China's economy for the better as a whole," Han Wenxiu, executive deputy director of the office of the Central Committee for Financial and Economic Affairs, was quoted as saying by Xinhua.
Markets have been concerned about a surge in new Covid-19 infections in the country, following the relaxation of pandemic curbs earlier this month.
"Beijing is clear about its message that it will do whatever it takes to boost economic growth in the country, and the fact that China is the biggest importer of oil gives traders much-needed confidence about the future of oil demand," Naeem Aslam, chief market analyst at AvaTrade, said.
Prices were also supported by improving business sentiment in Germany, the EU's largest economy, despite an energy crisis and high inflation.
The ifo Business Climate Index, which measures the country's business environment and sentiment once a month, rose to 88.6 points in December, up from 86.4 points in November.
“Companies assessed their current situation as better again. This comes on the heels of six consecutive falls in the indicator for the current situation,” the Munich-based research institute said.
“German business is entering the holiday season with a sense of hope.”
The US announcing plans to restock its emergency crude reserves has helped ease demand-related concerns this week.
The US said that it would replenish its Strategic Petroleum Reserve, starting with a purchase of 3 million barrels of crude.
The purchase of barrels for delivery in February follows the release of a record 180 million barrels of oil from the country's reserves this year.
“This repurchase is an opportunity to secure a good deal for American taxpayers by repurchasing oil at a lower price than the $96 per barrel average price it was sold for, as well as to strengthen energy security,” the US Department of Energy said on Friday.
Crude prices rallied last week amid the closure of a key US pipeline and expectations of higher demand.
Also last week, the International Energy Agency increased its global oil demand growth estimate for this year and the next on rising crude consumption in India, China and the Middle East.
The agency now expects oil demand to grow by 1.7 million barrels per day in 2023, up from its previous estimate of 1.6 million bpd.
Oil demand will grow by 2.3 million bpd this year, a 140,000 bpd increase over the agency’s previous forecast.
“Despite the seasonal slowdown in world oil demand and continued macroeconomic headwinds, recent oil consumption data has surprised to the upside,” the IEA said.
Meanwhile, Opec stuck to its oil demand growth forecast for this year and 2023.
The oil producers’ group expects the world economy to grow by 2.8 per cent this year, up from its previous estimate of 2.7 per cent.
