Oil jumped above $90 a barrel as commodities and stocks in Asia rallied on optimism over China potentially easing its Covid restrictions. West Texas Intermediate futures surged almost 3%, putting crude on track for a second weekly advance, after rumors circulated on social media that China may change its Covid Zero policy. Oil got a further boost from news that the nation is working on plans to scrap a system that penalizes airlines for bringing virus cases into the country. China is the world’s biggest crude importer.
China’s Covid Zero strategy relies on lockdowns and mass testing to stamp out infections and has weighed heavily on the nation’s economy this year. Bank of China International Ltd. estimates the country’s oil demand will decline by 400,000 barrels a day in 2022 due to virus curbs. Chatter about easing Covid Zero earlier in the week sparked gains across commodity markets and prompted the country’s top health body to say the strategy remains the overall approach to fighting Covid-19.
“The market senses something is on the go here, thinking where there is smoke, there is fire,” said Stephen Innes, managing partner at SPI Asset Management. “No one wants to be late to the China re-opening party.”
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Oil futures have swung in a wide arc in recent sessions along with broader market trends and shifts in the dollar, while lackluster trading volumes have led to more volatility. Investors are also grappling with a tightening supply outlook and concerns over a global economic slowdown. Saudi Arabia trimmed its oil prices for December sales to Asia, highlighting some concern over the outlook for demand. The kingdom sells most of its crude under long-term contracts to the region. However, the OPEC+ alliance will make sizable cuts to output from this month, which will be followed by European Union sanctions on Russian crude flows from December. NN: China will soon be back consuming more energy then ever before. This will only exasperate the fossil fuel shortages. China is the worlds largest importer of fossil fuels….. They are not buying into the Greeneieewinnieee wet dream. They have signed not a single climate accord….