Oil prices rose for the second consecutive day on Tuesday as loosening Covid-19 restrictions in China, the world’s largest crude importer, eased demand concerns.
Brent, the benchmark for two thirds of the world’s oil, was 1.44 per cent higher at $79.11 at 9.47am UAE time. West Texas Intermediate, the gauge that tracks US crude, was up 1.35 per cent at $74.16 a barrel.
China, the world’s second-largest economy, is reopening its economy after following a strict zero-Covid policy for nearly three years.
“Crude prices are rising on hopes China’s demand situation will quickly improve and on concerns that supplies will be kept tight by both Russia and Opec,” Edward Moya, senior market analyst at Oanda, said.
“China’s reopening is coming, it won’t happen overnight, but it will provide a major boost to demand in the outlook next quarter.”
Prices also edging up as investors looked forward to the last US Federal Reserve meeting of 2022 later today as well as the latest inflation data.
A larger-than-expected rise in US consumer price index could bolster fears of more aggressive interest rate increases. Last month, the Fed raised the policy rate for a fourth consecutive time by 75 basis points with the aim of bringing inflation down towards its target range of 2 per cent.
Supply constraints in the US, one of the world’s largest oil markets, have been supporting crude futures.
Last week, the Keystone pipeline, which transports Canadian crude to refiners in the US Midwest and the Gulf Coast, was shut down after more than 14,000 barrels of crude oil spilled into a creek in Kansas.
TC Energy, which operates the 622,000 barrel-per-day oil link, said it would only resume service with regulatory approval.
“Our teams continue to actively investigate the cause of the incident. We have not confirmed a timeline for restart,” the company said on Sunday.
Russian President Vladimir Putin has threatened to cut oil production in response to the G7 price cap on Moscow’s crude exports.
The Group of Seven advanced economies agreed on a price cap of $60 per barrel earlier this month, following weeks of negotiations.
Russian oil exports rose to 7.7 million bpd in October, up 165,000 bpd from the previous month, on higher shipments to the EU, China and India, the International Energy Agency said.
Oil prices could find a floor at $70 a barrel, with the US having previously indicated that it would refill its Strategic Petroleum Reserve when crude falls to between $67 and $72, according to analysts.
“Oil has too much support at the $70 level, which should suggest the recent change with China’s approach to fighting Covid could support a rally towards the $80 level,” Mr Moya said.