Oil prices rose slightly on Thursday as the loosening of Covid-19 restrictions in China, the world’s second-largest economy and biggest crude importer, eased demand concerns.
Brent, the benchmark for two thirds of the world’s oil, was trading about 1.4 per cent higher at $78.22 a barrel at 4.14pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was up 2.2 per cent at $73.61 a barrel.
Oil futures fell to below $80 a barrel this week for the first time since January, on persistent fears of a recession and rising interest rates by central banks worldwide.
“Crude prices declined as energy traders quickly abandoned bullish bets that we will see a price spike once the Russian cap on crude oil would be put in place,” said Edward Moya, senior market analyst at Oanda.
“It seems oil markets are only caring about a steady deterioration with the demand outlook.”
Chinese authorities announced that they were easing nationwide Covid-19 rules, the first set of widespread reforms to its zero-Covid policy since rare protests erupted late last month.
Proof of a negative PCR test will no longer be required for entry to public places, with the exception of schools, nurseries and care centres for the elderly, the National Health Commission announced on Wednesday.
Oil prices were also supported by data showing that Germany’s economy — the world’s fourth largest — shrank less than expected in October.
“The October German industrial production print boosted hopes that a recession in the eurozone may be milder than previously anticipated,” Emirates NBD said in a research note.
Industrial production in the country fell 0.1 per cent in October, lower than analysts’ estimates of a 0.6 per cent drop.
US crude stocks decreased by 5.2 million barrels in the week ending on December 2, according to the US Energy Information Administration (EIA).
The indicator, which shows the level of oil and related products stored, gives an overview of US petroleum demand. If the increase in crude inventories is more than expected, it implies weaker demand and is bearish for crude prices.
Petrol inventories rose by 5.3 million barrels during the same period while distillate fuel stocks were higher by 6.2 million barrels, the EIA said.
The EIA said in its short-term energy outlook report that it expected global oil stocks to fall by 200,000 barrels per day in the first half of 2023 before rising by about 700,000 bpd in the second half of next year.
“Gasoline inventories are rising as demand struggles … this report shows the economy is clearly weakening and does not give energy bulls any reasons to buy into this weakness,” said Mr Moya.