Oil prices rebounded on Tuesday as investors weigh the possibility of an output cut by Opec+ at a key meeting later this week.
Brent, the benchmark for two thirds of the world’s oil, was trading 3 per cent higher at $85.56 a barrel at 9.55pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was up 2.3 per cent at $79.05 a barrel.
Brent crude fell to about $80 a barrel on Monday after protests were reported in a number of cities in China as the government continued with its zero-Covid policy to contain the pandemic.
China will speed up its vaccination programme for the elderly, authorities have announced following record case numbers.
The plan is to push vaccinations in places including nursing homes, while making those unwilling to be inoculated provide a reason for their refusal, the National Health Commission said on Tuesday.
"There is no doubt that prices have been way oversold ... it seems like bargain hunters are stepping into the market and now trying to support the price action," Naeem Aslam, chief market analyst at AvaTrade, said.
"On the fundamental side, it is the Opec meeting that matters the most ... it is pretty clear that Opec is in no mood to increase production."
Investors are closely watching talks between EU member states about a price cap on Russian crude.
With just days to go until the December 5 deadline, members have not yet come to an agreement, with countries such as Poland arguing that a high price cap will do little to restrict Moscow’s oil revenues.
Last week, a Group of Seven advanced economies (G7) proposal to set the price cap in the $65 to $70 range was rejected by some members, as it is close to prices Russia is already receiving for its crude.
“It's looking increasingly likely to be done at a level that doesn't particularly hinder Russia's ability to sell crude — which is contributing to the drop in oil prices — or put its buyers in an uncomfortable position,” Craig Erlam, senior market analyst at Oanda, said.
“The outcome will likely factor in how the Opec+ responds this weekend and I expect the rumour mill will therefore be busy as the week progresses, which in turn could trigger a lot of oil price volatility over the course of the week,” he added.
The Opec+, a group of 23 oil producing countries, in October reduced its collective output by two million barrels per day in response to a slowing economy.
It has not ruled out the possibility of further production cuts as demand concerns continue to weigh on crude prices.
Last week, Saudi Energy Minister Prince Abdulaziz bin Salman reaffirmed that the group’s current output cut would continue until the end of 2023.
“If there is a need to take further measures by reducing production to balance supply and demand, we always remain ready to intervene,” Prince Abdulaziz was quoted as saying by the Saudi Press Agency.
His comments came in response to a Wall Street Journal report stating that Saudi Arabia, the world’s largest crude exporter, was considering raising output targets by 500,000 bpd at the Opec+ meeting on December 4.
Brent crude, which touched $98 a barrel in the first week of November, is down more than 4 per cent since the Opec+ decision in October to cut production.
