Oil headed for its biggest weekly advance in almost two months as China took more steps to soften its strict virus controls and Washington mulled a pause in sales from strategic reserves.
West Texas Intermediate traded above $81 a barrel after a run of four daily gains. Beijing said it would allow some infected people to isolate at home, another softening of the Covid Zero policy, which has weighed on economic growth in the world’s biggest oil importer.
Adding to the brightening outlook were calls by the Biden administration to stop sales from the Strategic Petroleum Reserve and allow refilling of the country’s emergency oil stockpiles. A Bloomberg gauge of the dollar is at the lowest since June, another tailwind for crude that’s priced in the US currency.
Oil has staged a sharp rebound after hitting its lowest level since 2021 on Monday as demand prospects improved due to the scaling back of China’s crippling Covid-Zero policy. There were also signs from Federal Reserve officials that the pace of interest-rate hikes could be slowed after a gauge of US consumer prices came in below estimates.
The Organization of Petroleum Exporting Countries and allies will meet virtually this weekend, and there are expectations they may hold output steady. Traders are also watching for further details on the Group of Seven-led price cap on Russian seaborne oil, with the European Union is closing in on a $60 a barrel price cap before a deadline on Monday.
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The $60-a-barrel price “is still above the current levels that Russia is receiving for its crude oil,” said Warren Patterson, head of commodities strategy at ING Groep NV in Singapore. “If agreed at this level, it will have little impact on Russian oil revenues at the moment.”
Shipping costs for Russian crude are skyrocketing as more tanker owners shun the trade days before the stricter EU sanctions take effect. Owners who are still willing to load Russian crude are attempting to charge more for the risk.
© 2022 Bloomberg
