Oil set for weekly gain as China eases curbs before OPEC+ meets

Oil steadied but was on track for its biggest weekly gain in almost two months, as China softened virus controls and a weaker dollar boosted the allure of commodities. 

West Texas Intermediate held near $81 a barrel after a run of four daily gains. The uptick in prices comes ahead of a key meeting of the Organization Petroleum Exporting Countries and its allies this weekend, along with a last-minute drive by the European Union to agree on a price cap for Russian oil.

China, the world’s largest oil importer, said it would allow some infected people to isolate at home, another softening of its Covid Zero policy. In addition, People’s Bank of China Governor Yi Gang said the central bank is now centered on economic growth, aiding the outlook for energy consumption. 

Oil has staged a sharp rebound this week after hitting its lowest level since 2021 on Monday, with demand prospects improving due to the scaling back of China’s Covid policy following protests. There have also been clear signs from Federal Reserve officials that the pace of interest-rate hikes will slow as a gauge of US consumer prices came in below estimates.

“It’s the news on China which is having a positive impact,” said Neil Beveridge, senior oil analyst at Sanford C Bernstein on Bloomberg Radio. “On the supply side there are a lot of uncertainties as we head into next week.”

Prices

  • WTI for January delivery was little changed at $81.26 a barrel by 10:48 a.m. in London.
  • Most-active futures are more than 6 per cent higher this week.
  • Brent for February settlement was steady at $86.92 a barrel on the ICE Futures Europe exchange.

Reinforcing the brightening outlook were calls by the Biden administration to halt sales from the Strategic Petroleum Reserve and allow refilling of the country’s emergency stockpiles. In currency markets, a Bloomberg gauge of the dollar extended a retreat, another tailwind for crude.

There are expectations that OPEC+ will agree hold output steady when the group gathers for a virtual meeting on Dec. 4. Traders are also watching for further details on the Group of Seven-led price cap on Russian seaborne oil, with the EU closing in on a $60 a barrel cap before a Monday deadline.

© 2022 Bloomberg L.P.

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