LONDON: Oil rose on Monday after falling by more than $2 a barrel in the previous session as optimism over the Chinese economy outweighed concern over a global recession.

China, the world’s top crude oil importer, is experiencing its first of three expected waves of COVID-19 cases after Beijing relaxed mobility restrictions but said it plans to step up support for the economy in 2023.

“There is no doubt that demand is being adversely influenced,” said Naeem Aslam, analyst at brokerage Avatrade.

“However, not everything is so negative as China has vowed to fight all pessimism about its economy, and it will do what it takes to boost economic growth.”

Oil slumps by $2/bbl, dogged by recession fears

Brent crude gained 65 cents, or 0.8%, to $79.69 a barrel by 1248 GMT while U.S. West Texas Intermediate crude rose 85 cents, or 1.1%, to $75.14.

Oil surged towards its record high of $147 a barrel earlier in the year after Russia invaded Ukraine in February. It has since unwound most of this year’s gains as supply concerns were edged out by recession fears, which remain a drag on prices.

The U.S. Federal Reserve and European Central Bank raised interest rates last week and promised more. The Bank of Japan, meanwhile, could shift its ultra-dovish stance when it meets on Monday and Tuesday.

“The prospect of further rate rises will hit economic growth in the new year and in doing so curb demand for oil,” said Stephen Brennock of oil broker PVM.

Oil was supported by the U.S. Energy Department saying on Friday that it will begin repurchasing crude for the Strategic Petroleum Reserve - the first purchases since releasing a record 180 million barrels from the reserve this year.