Futures for West Texas Intermediate crude rose almost 3%, leading to the second week of gains after word circulated on social media that China could change its Covid Zero policy. Oil was also boosted by news that the country plans to waive penalizing airlines for bringing cases of the virus into the country. China is the world’s largest importer of crude oil.
The Chinese policy of Covid Zero, which puts on lockdowns and mass testing to eradicate infections, has also had a strong impact on the country’s economy this year. According to the Bank of China International Ltd., the demand for oil in the country will decrease by 400000 barrels per day in 2022 due to the policy of not spreading the virus.
Rumors of an easing of Covid Zero earlier in the week sent commodities markets up and prompted the country’s top health authority to say the strategy is still 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.”
Oil futures have fluctuated quite a lot in recent sessions with broader market trends and changes in the dollar, while low trading volumes have led to more volatility. Traders and investors are also grappling with deteriorating future supply and fears of a global economic slowdown.
Saudi Arabia slashed oil prices for December sales to Asia, drawing attention to concerns about the demand outlook. The kingdom sells most of its oil to the region under long-term contracts, but the OPEC+ alliance will significantly cut production this month, followed by European Union sanctions on Russian oil supplies from December.
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