Oil set for weekly gain on prospects of steady Opec+ supply and easing China Covid curbs

Traders keenly awaiting more details on G7-led price cap on Russian seaborne oil

Shop owners preparing for reopening in Urumqi, China, after the easing of Covid-19 restrictions. AFP

Oil prices remained steady on Friday, heading for a weekly gain, buoyed by prospects of Opec+ not increasing crude supply when it meets next week and easing of Covid-19 restrictions by China that will help boost demand in the world's biggest oil-importing economy.

Brent, the benchmark for two thirds of the world’s oil, was trading marginally lower at $86.60 a barrel at 3.41pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was down 0.36 per cent at $80.93 a barrel.

China, the world’s second-largest economy, is easing pandemic-related movement restrictions that have slowed economic momentum and dented crude demand.

In Zhengzhou, a large metropolis on the Huang river, businesses have reopened and home quarantine has been slashed for close contacts of Covid-positive cases in other cities, AFP reported.

In the capital Beijing, daily testing requirements have also been relaxed, with people who do not leave home frequently, including the elderly and online students, now exempt from daily testing.

However, a negative test result within the previous 48 hours will still be required for entry to various public places including shopping centres and restaurants.

Lockdowns have been lifted in several districts in the industrial city of Guangzhou.

Oil prices are also supported by expectations that Opec+ will not increase supply when it meets next week.

"Oil prices are on track to record solid gains for this week as traders are optimistic that the upcoming gathering next week isn’t going to increase the supply and oil demand will improve in China," Naeem Aslam, chief market analyst at AvaTrade, told The National.

The 23-member supergroup will meet on Sunday to decide its future policy after the producers had agreed to reduce output target by 2 million barrels per day amid demand concerns during their last meeting in October.

Traders are also watching for further details on the G7-led price cap on Russian seaborne oil, with the European Union closing in on a $60 per barrel price cap before a deadline on Monday.

“The Kremlin has threatened countries that abide by the cap with being cut off which will leave some in a very uncomfortable position, choosing between losing access to cheap Russian crude or facing G7 sanctions,” Craig Erlam, senior market analyst at Oanda said.

“As ever, the devil will be in the detail. But one thing is clear, crude carries significantly more weekend risk and could be extremely volatile on the open next week.”

Oil prices remained volatile this year amid the Russia-Ukraine conflict, Covid-19-related movement restrictions in China, supply disruption in Libya after the closure of some oilfields and growing recession fears hitting fuel demand globally.

Brent touched almost $140 per barrel in March as a result of the Ukraine crisis but fell in the subsequent months as central banks from developed nations increased interest rates and concerns grew over global economic growth.