Oil prices rise on hope that China eases Covid-19 restrictions

Investors will have keen interest in Opec+ meeting on Sunday

A pump jack in the US state of New Mexico. An EU embargo on seaborne Russian crude exports is expected to come into effect on December 5. Reuters

Oil prices rose on Thursday on the hope that leading crude importer China would ease its zero-Covid policy, despite an increase in the number of cases in the country.

Brent, the benchmark for two thirds of the world’s oil, was trading 2.36 per cent higher at $89.02 a barrel at 6.22pm UAE time.

West Texas Intermediate, the gauge that tracks US crude, was up 2.91 per cent at $82.89 a barrel.

China is in a new stage of its fight against Covid as several cities relax restrictions after protests at the weekend, the country's Vice Premier said on Wednesday.

The country "is facing a new situation and new tasks in epidemic control" as the Omicron variant weakens and the vaccination rate increases, Sun Chunlan, who also oversees China's Covid response, said in a meeting of the National Health Commission.

“Oil prices are rallying on China's opening optimism, and after another round of US economic data showed the economy is weakening but still far from a recession,” said Edward Moya, senior market analyst at Oanda.

Investors will closely watch an Opec+ meeting on Sunday. The oil supergroup, which decided to reduce its output by two million barrels per day in October, will meet a day before the deadline for a price cap on Russian crude.

EU governments have so far failed to agree on a price cap as Poland and several other countries insist on a cap lower than the G7's proposal of $65 to $70 a barrel.

“Energy traders see two potential bullish catalysts for oil prices: an Opec+ decision that could easily justify lower output targets and a Russian crude price cap that needs to be put in place, otherwise a ban on Russian imports takes effect on December 5,” Mr Moya said.

An EU embargo on seaborne Russian crude exports is expected to come into effect on December 5 — a day after the Opec+ meeting — along with the price cap.

Swiss bank UBS, which this week said it expected oil to rebound to $100 a barrel in the coming months, said markets would be tight given crude oil stocks in the Organisation for Economic Co-operation and Development countries are at an 18-year low.