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Oil Prices Climb on China Demand Recovery Signals

Oil prices rose on Monday following optimistic comments from the International Energy Agency (IEA) about a recovery in Chinese demand. IEA head, Fatih Birol, reiterated the agency's prediction that China will drive global crude demand to record highs this year.

Despite the positive outlook, PMI data from last week showed a mixed picture of China's economy, with some sectors still struggling due to rising COVID-19 cases. Still, Oil prices remain under pressure due to concerns over U.S. monetary policy.

The rebound in the dollar has also put pressure on crude prices as it makes oil more expensive for international buyers. The market is now awaiting any signs of an economic recovery in China, starting with inflation readings for January due later this week. Despite the optimistic outlook, tensions between the U.S. and China have dulled optimism over a Chinese recovery, after the U.S. shot down a suspected Chinese spy balloon. The OPEC+ decision to hold production steady and unexpectedly large builds in U.S. crude inventories also weighed on crude prices, pointing to a potential near-term supply glut in the world's largest oil consumer.

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