Singapore — Oil prices rose on Monday, extending gains from the previous session, after China eased some of its strict Covid-19 protocols, fuelling hopes of a recovery in economic activity and demand at the world’s top crude importer.
Contracts for Brent crude and US West Texas Intermediate edged up nearly 1% earlier in the session but later pared some gains. Brent crude futures were last up 31c, or 0.3%, to $96.30 a barrel by 6.30am after settling up 1.1% on Friday.
US West Texas Intermediate crude futures were also up 23c, or 0.3%, at $89.19 a barrel after closing Friday’s session 2.9% higher.
Commodities prices rallied on Friday after China’s National Health Commission adjusted its Covid-19 prevention and control measures. But Covid-19 cases climbed in China at the weekend.
“The market was too optimistic. The virus will spread faster in winter and the rapid growth of cases makes it impossible for the Chinese government to adjust the zero-Covid-19 policy,” said Leon Li, a Shanghai-based analyst at CMC Markets.
“Moreover, it will take some time from the release of the policy to its implementation, so China’s full liberalisation may have to wait until the first quarter of next year, which means that the rebound of oil prices last Friday is unsustainable.”
The easing curbs in China, the world’s largest crude oil importer, included shortening quarantine times for close contacts of cases and inbound travellers by two days, as well as eliminating a penalty on airlines for bringing in infected passengers.
China’s demand for oil from the world’s top exporter, Saudi Arabia, also remained weak as several refiners have asked to lift less crude in December.
“The latest easing in quarantine requirements is certainly a step in the right direction, but the market is likely to need to see further easing if this recent enthusiasm is to be sustained,” ING said in a note.
Separately, US Treasury secretary Janet Yellen said on Friday that India can continue buying as much Russian oil as it wants, including at prices above a G7-imposed price cap mechanism, if it steers clear of Western insurance, finance and maritime services bound by the cap.
A firmer dollar kept a lid on oil price gains.
US Federal Reserve governor Christopher Waller has said it would take a string of soft reports for the bank to take its foot off the brakes on interest rate hikes which have been driving up the dollar and depressing prices of commodities priced in the greenback.
On the Indonesian island Bali ahead of the G20 summit, US President Joe Biden and Chinese leader Xi Jinping will meet in person on Monday for the first time since Biden took office.