Oil prices have rebounded this week following last week’s welcome drop as data from China shows a rapid increase in manufacturing output, stimulating the market with possible signs of increased oil demand. This is welcome news for China as well as the rest of the world dealing with supply chain issues following a prolonged slump due to widespread lockdowns across the country.

Reuters reported that China’s factory activity rose last month for the first time in seven months. PMI data also showed manufacturing activity expanding at the fastest rate in over a decade, reinforcing expectations of a strong economic rebound in the world’s largest oil importer.

China’s oil demand is seen as the chief factor behind expectations for higher oil prices later in the year. A recent Reuters poll among economists showed that most expect Brent crude to top $90 per barrel in the second half of 2023. The respondents cited Chinese demand and Russian supply as factors.

This week, the anticipation of demand from China was so significant that it outweighed the American Petroleum Institute's report of yet another increase in crude oil inventories in the United States. The API stated that there was a build of 6.2 million barrels.

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