Oil extends gain as Saudi Arabia bets on demand rebound in Asia

Oil rose for a second session after Saudi Arabia unexpectedly raised its crude prices to Asia, signalling confidence in the demand outlook.

West Texas Intermediate futures edged toward $75 a barrel after closing 1 per cent higher on Monday.

Saudi Aramco increased most of its prices for crude that will be shipped to its main market of Asia in March, amid growing optimism over a robust demand rebound in China following the end of Covid Zero.

Supply outages also added to bullish tailwinds for oil.

Turkey halted flows to the Ceyhan export terminal after a major earthquake, while output at Norway’s giant Johan Sverdrup field was lower due to a power disruption.

Read: Fourth major quake of 5.6 magnitude hits Turkey

Oil has endured a choppy start to the year, whipsawed by optimism around China’s reopening and fears over the prospect for a global economic slowdown.

The market is also assessing the potential fallout from fresh European Union sanctions on Russian refined products and how that will impact trade flows.

Saudi Arabia is “potentially betting on China’s demand recovery,” said Gao Jian, an analyst with Shandong-based Qisheng Futures.

The focus remains on Russia, with the market assessing whether a reduction in diesel supply will support crude, he added.

The Brent futures curve is still signalling tight near-term supply, despite the outages in Turkey and Norway.

The prompt spread — the difference between its two nearest contracts — was 32 cents a barrel in backwardation.