May 22, 2024

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China's oil rise likely to ease COVID restrictions

China’s oil rise likely to ease COVID restrictions

  • Report: China is considering reducing quarantine time for visitors
  • Looming EU embargo on Russian oil, supportive OPEC+ cuts
  • US oil reserve sales plan fails to bring prices down

NEW YORK (Reuters) – Oil prices rose more than 1% on Thursday on news that China is considering easing COVID-19 quarantine measures for visitors, boosting hopes of increasing energy demand in the world’s largest oil importer.

Brent crude futures rose $1.30, or 1.4 percent, to $93.71 a barrel by 11:07 a.m. EDT (1507 GMT).

US West Texas Intermediate crude for November delivery, which expires on Thursday, rose $1.76, or 2.1%, to $87.31 a barrel. West Texas Intermediate crude for December delivery rose $1.45, or 1.7%, to $85.97 a barrel.

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Beijing is considering reducing the quarantine period for visitors to seven days from ten days, Bloomberg News reported Thursday, citing people familiar with the matter. Read more

China, the world’s largest importer of crude, has adhered to the severe restrictions of Covid this year, which severely affected trade and economic activity, which led to a decrease in demand for fuel.

“We have some upside as a result of events in China,” said Bob Yoger, director of energy futures at Mizuho in New York. “This is a positive indicator of market demand.”

Also supporting prices were an imminent European Union ban on Russian crude and oil products, as well as production cuts from the Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+.

OPEC+ agreed to cut production by 2 million barrels per day in early October.

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Separately, US President Joe Biden announced a plan Wednesday to sell the remainder of his release from the nation’s Strategic Petroleum Reserve (SPR) by the end of the year, or 15 million barrels of oil, and begin refilling the stock as he attempts high damping. Gasoline prices ahead of the mid-term elections on November 8.

However, the announcement failed to ease oil prices, as official US data showed that the Strategic Petroleum Reserve fell last week to its lowest level since mid-1984, while commercial oil stocks fell unexpectedly.

“Yesterday’s failed attempt to cool oil prices is further evidence that the United States has lost influence over global oil markets,” said Stephen Brennock of BVM Oil.

Meanwhile, global fuel demand remains uncertain. The Federal Reserve (the US central bank) said on Wednesday in its report that US economic activity expanded modestly in recent weeks, although it held steady in some areas and declined in others, showing increasing corporate pessimism about the outlook.

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(Reporting by Stephanie Kelly in New York; Additional reporting by Ahmed Ghaddar in London and Emily Chow in Singapore. Editing by Margarita Choi and Kirsten Donovan

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