LONDON: Oil prices held near this year’s highs on Monday as easing COVID restrictions in China raised expectations for a demand recovery in the world’s top crude importer.

Brent crude fell 38 cents, or 0.45%, to $84.90 a barrel by 1012 GMT, while U.S. West Texas Intermediate crude was down 26 cents, or 0.33%, at $79.60 a barrel, amid thin trade during Monday’s U.S. public holiday.

Both contracts rose more than 8% last week, the biggest weekly gains since October after China abandoned what remained of its zero-COVID policy by reopening its borders on Jan. 8.

China’s crude imports rose 4% year on year in December, while an expected resurgence in travel for the Lunar New Year holiday at the end of the week raised the outlook for demand for fuels used in transport.

Oil posts biggest weekly gain since October

Traffic levels in China are rebounding from record lows after the easing of COVID-19 restrictions, resulting in stronger demand for crude and oil products, ANZ analysts said in a note.

But new reports over the weekend highlighting an increase in COVID-19 deaths weighed on sentiment.

“While China’s outlook has turned a corner, it must be noted that the normalisation of its oil demand will be gradual … As things stand, China’s oil recovery remains anticipated rather than realised,” PVM analyst Stephen Brennock said.

Meanwhile, the Organization of the Petroleum Exporting Countries and the International Energy Agency will release their monthly reports this week, closely watched by investors for global demand and supply outlooks.

Investors will also be look for clues about the outlook from the World Economic Forum (WEF) in Davos which opened on Monday and will be watching a Bank of Japan (BOJ) meeting this week to determine if it will defend its super-sized stimulus policy.