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Monday, January 30, 2023
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Oil hits three-week high on China COVID curb ease

China COVID curb

Brent crude was up 22 cents, or 0.3 per cent, at $84.14 a barrel and U.S. West Texas Intermediate crude gained 7 cents to $79.63

Oil hit a three-week high on Tuesday as China’s latest easing of COVID-19 restrictions spurred hopes of a fuel demand recovery, with further support coming from cuts to U.S. energy production caused by winter storms.

China will stop requiring inbound travellers to go into quarantine, starting from Jan. 8, the National Health Commission said on Monday in a major step towards easing curbs on borders that have been largely shut since 2020.

Brent crude was up 22 cents, or 0.3 per cent, at $84.14 a barrel by 0911 GMT and U.S. West Texas Intermediate crude gained 7 cents to $79.63. Both benchmarks hit their highest since Dec. 5 earlier in the session.

This is certainly something that traders and investors have been hoping for, Avatrade analyst Naeem Aslam said of China’s plan over the quarantine rule.

UK and U.S. markets had been closed on Monday for Christmas holidays.

Equities gained while the U.S. dollar softened on Tuesday in response to the Chinese move. A weaker dollar makes oil cheaper for holders of other currencies and tends to support risk assets.

Oil also drew support from worries over supply disruption because of winter storms in the United States, said Kazuhiko Saito, chief analyst at Fujitomi Securities.

But the U.S. weather is forecast to improve this week, which means the rally may not last too long, he said.

As of Friday, some 1.5 million barrels of daily refining capacity along the U.S. Gulf Coast was shut, while oil and gas output from North Dakota to Texas suffered freeze-ins, cutting supply.

Concern over a possible production cut by Russia also provided price support.

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