Oil rallied at the start of the week on hopes of renewed Chinese crude buying

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Oil rallied at the start of the week on hopes of renewed Chinese crude buying and as the dollar extended its decline.

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West Texas Intermediate futures surged as much as 3.8 percent to move above $76 a barrel Monday. China issued a fresh batch of crude oil import quotas in a sign that the world’s largest purchaser may be about to boost consumption.

Meanwhile, the Federal Reserve may lean toward smaller interest-rate increases after wage growth cooled in December, another step down in its aggressive campaign of monetary tightening. That’s put pressure on the US dollar, which slipped again Monday, and added to tailwinds for commodities priced in the currency.

Crude had a sluggish start to the year, posting a drop of around 8 percent last week as nearby oil markers flash signs of weakness. For now traders are awaiting signs of a meaningful up-tick in Chinese demand, though there has been improvement in mobility gauges over recent days.

“China reopening remains the major bullish catalyst story out there, said Keshav Lohiya, founder of consultant Oilytics. “We are generally on the oil bull side, but the price rise will not be a straight line as it was in 2004-08.

This week also marks the beginning of the annual rebalancing of the largest commodity indexes, a period usually characterized by volatile flows across raw materials markets. The period should see more than $1 billion of inflows into the global Brent benchmark, while leading to outflows from WTI, according to separate estimates from Citigroup Inc. and Societe Generale SA.

The Biden Administration is delaying purchases to refill the emergency oil reserve after deciding that the offers it received were either too expensive or didn’t meet the required specifications, according to people familiar with the matter.

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