Oil is poised for a significant weekly gain as China demand rises

Oil prices fell in early trade on Friday, but were still on course for weekly gains of more than 6%, thanks to strong signals of demand growth in top crude oil importer China and predictions of less aggressive interest rate hikes in the United States.

Brent crude prices declined 17 cents, or 0.2%, to $83.86 a barrel by 0119 GMT, while WTI crude futures in the United States down 12 cents, or 0.2%, to $78.27.

Brent is up 6.7% this week, while WTI is up 6.2%, recouping the majority of the previous week's losses.

Analysts said recent Chinese crude purchases and an increase in road traffic boosted confidence in the world's second-largest economy's demand rebound following the reopening of its borders and loosening of COVID-19 regulations following demonstrations last year.

"Given the emphasis on energy security, we believe that Chinese imports will continue to rise, particularly as refineries ramp up and crude stockpiling remains a strategic objective," RBC commodity strategist Michael Tran wrote in a client note.

In another hopeful indicator, ANZ analysts said that a congestion index encompassing the 15 Chinese cities with the most vehicle registrations had increased 31% from the previous week.

"China's road traffic volumes are continuing to climb from record low levels as COVID-19 restrictions are eased," ANZ analysts wrote in a note.

Oil prices have also been supported by a drop in the dollar to a nearly nine-month low following data showing US inflation declined for the first time in two and a half years, boosting predictions that the Federal Reserve may pause the pace of rate hikes.

A weakening dollar tends to stimulate demand for oil by making the commodity more affordable to purchasers holding foreign currencies.