U.S. oil benchmark tops $90 a barrel on China reopening hopes

By William Watts

Natural gas on track for 9% weekly rise

Oil futures rose early Friday, on track for weekly gains, as market bulls looked for signs China may soon move to ease COVID restrictions and allow economic growth to revive.

Price action

Market drivers

Ongoing speculation around an easing of COVID-19 curbs in China provided support for crude. The Wall Street Journal reported Friday that Zeng Guang, who was formerly the chief scientist at the Chinese Center for Disease Control and Prevention, said at a conference that there were expected to be “significant” changes to the company’s zero-COVID approach in 2023, according to multiple unnamed sources.

Related: Alibaba, JD.com, Nio extend rally in Chinese stocks amid continued hope for relaxing COVID rules

China’s COVID-zero policies of stringent lockdowns and other curbs have been seen as keeping a lid on crude prices in 2022.

“Oil prices are getting a bounce on the news as traders ultimately think of China more as a driver of upside to demand at some point next year when the reopening of the economy accelerates rather than as a current incremental driver of demand weakness. In other words, the light at the end of the COVID-zero tunnel is more attractive than today’s gloomy outlook,” said Stephen Innes, managing partner at SPI Asset Management, in a note.

Meanwhile, the Journal reported that the U.S. and its allies had reached an agreement on which types of oil sales will be subject to a cap on Russian prices when new sanctions take effect on Dec. 5.

Seaborne Russian oil will only be subject to the cap when its first sold to buyers on land, the report said, meaning resales won’t fall under the same cap. Intermediary trades of Russian oil that occur at sea would remain subject to the cap, while refined products, such as gasoline, would not.

-William Watts


(END) Dow Jones Newswires

11-04-22 0728ET

Copyright (c) 2022 Dow Jones & Company, Inc.

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