By Peter Nurse
Investing.com -- Oil prices edged higher Friday, on track for solid weekly gains, as slowing U.S. inflation and China's reopening raised optimism of stronger global economic growth, and thus increased crude demand.
By 09:25 ET (14:25 GMT), U.S. crude futures traded 1% higher at $79.14 a barrel, while the Brent contract rose 0.7% to $84.64 a barrel.
Both contracts hit their highest levels in 10 days and are on course for gains of over 6% so far this week.
These strong gains mark a sharp reversal after the weak start to the year and have largely been driven by increased confidence over an economic recovery in China, the world's largest crude importer after Beijing reopened its international borders for the first time in three years.
Anecdotal evidence points to increased traffic as the country gears up for the Lunar New Year holiday, its busiest period of the year.
Additionally, latest trade data showed that crude oil imports in December averaged 11.35 million barrels a day, up around 4.1% year-on-year, and this number is only expected to increase in 2023.
"Optimism around the China demand story has only provided further support to the oil market," said ING, in a note. "Our balance shows that the oil market should tighten as we move through the year. This should prove constructive for prices, particularly when you consider the modest net long speculators currently hold in Brent."
Also helping the tone has been the fall in the dollar to a near nine-month low after the latest data showed U.S. inflation falling, raising hopes the U.S. Federal Reserve will ease back on its monetary tightening, allowing other central banks around the world to give more support to their economies, too.
A weaker dollar makes commodities, including oil, which are denominated in dollars, cheaper for foreign buyers.
The Baker Hughes report on drilling rigs and the CFTC's positioning data close off the week later.