Oil prices dipped in early Asian trade on Monday, but held close to the highest levels since the start of the year on optimism that China’s reopening will lift fuel demand at the world’s top crude importer.

Brent crude fell 36 cents, or 0.4 per cent, to $84.92 a barrel by 0116 GMT while US West Texas Intermediate crude was at $79.65 a barrel, down 21 cents, or 0.3pc amid thin trade during a US public holiday.

Both contracts rose more than 8pc last week, the biggest weekly gain since October, after China’s crude imports rose 4pc year-on-year in December while Lunar New Year travel brightens the outlook for transportation fuels.

Traffic levels in China are continuing to rebound from record low levels following the easing of Covid-19 restrictions, resulting in stronger demand for crude and oil products, ANZ analysts said in a note.

The rebound in domestic demand is expected to lead to a 40pc drop in China’s exports of refined oil products in January from December’s figure, led by gasoline, trading sources and analysts said.

“While there is still plenty of optimism around Chinese demand, in the near term the oil market remains relatively well supplied,” ING analysts said in a note.

“We see further upside from 2Q23, as the market tightens.”

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

Investors will also be watching for a key Bank of Japan meeting this week to determine if it would defend its super-sized stimulus policy.