Oil rose more than 1% on US inflation data and optimism about demand

Oil prices rose more than 1 percent on Thursday, extending gains after data showed consumer prices in the United States fell unexpectedly in December, supported by optimism about the demand outlook in China.

The US Consumer Price Index fell 0.1%, indicating that inflation is now on a continuing downward trend. China, the largest oil importer, is reopening its economy after severe restrictions on the spread of the Coronavirus, which raises hopes for higher demand for oil.

Brent crude rose $1.36, or 1.7 percent, to settle at $84.03 a barrel. US West Texas Intermediate crude rose 98 cents, or 1.3 percent, to $78.39 a barrel.

Both benchmarks rose 3 percent in Wednesday’s session, supported by hopes for an improvement in the global economic outlook.

Oil also got support after the dollar fell to its lowest level in almost 9 months against the euro, after inflation data reinforced expectations that the Federal Reserve (the US central bank) would slow down the pace of rate hikes in the future.

The market is preparing for additional restrictions targeting sales of Russian fuel products due to the invasion of Ukraine.

The US Energy Information Administration said that the expected ban by the European Union on seaborne imports of Russian petroleum products on February 5 could be more severe than that imposed by the Union on seaborne crude imports from Russia in December 2022.