Oil prices jump on hopes of easing in China's Covid controls
OIL prices jumped on Tuesday (Nov 29), buoyed by hopes that China will relax its Covid-19 controls after rare protests against the country’s zero-Covid strategy over the weekend.
Brent crude futures advanced US$1.40 or 1.7 per cent, and traded at US$84.57 a barrel at 0645 GMT (2.45 pm Singapore time). US West Texas Intermediate (WTI) crude futures rose US$1.17 or 1.5 per cent to US$78.39 a barrel.
Both benchmarks gained more than US$2 earlier in the day.
China held a news conference on Covid prevention and control measures on Tuesday afternoon amid record infections and protests in Shanghai and Beijing.
Asian shares also rallied as unsubstantiated rumours swirled that the unrest might prompt a loosening of the restrictions. Similar rumours have caused markets to zigzag in recent weeks.
China analysts said the rare street protests in cities across China over the weekend were a vote against President Xi Jinping’s Covid Zero policy and the strongest public defiance during his political career. Beijing has stuck with the policy even as much of the world has lifted most restrictions.
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Oil prices are also supported by the expectation that major oil producers will adjust their production plans at the upcoming Opec+ meeting. The bloc, comprising the Organization of the Petroleum Exporting Countries (Opec) and allies including Russia, are set to meet on Dec 4.
Analysts at Eurasia Group suggested on Monday that weakened demand out of China could spur Opec+ to cut output.
“Although this is merely a guess ... not the official statement from Opec, it still reflects the near-term market sentiment and is likely to be the turning point of oil prices,” analysts from Haitong Futures said.
Opec+ started to lower its output target by two million barrels per day in November to shore up oil prices.
Markets are also assessing the impact of an upcoming Western price cap on Russian oil.
Group of Seven (G7) and European Union (EU) diplomats have been discussing a cap of between US$65 and US$70 a barrel, with the aim of limiting revenue to fund Moscow’s military offensive in Ukraine without disrupting global oil markets. Russia calls its actions in Ukraine “a special operation”.
But EU governments failed to agree on the cap on Monday. Poland insisted the cap should be set lower than that proposed by the G7, diplomats said.
The price cap is due to take effect on Dec 5, along with an EU ban on Russian crude. REUTERS
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