The world’s largest crude importer, China, may be loosening its rigorous COVID-19 limits, but there are conflicting indications about this. As a result, oil prices declined Monday, trimming gains after soaring to more than two-month highs.
Brent oil futures closed at $97.92 per barrel after losing 65 cents. They increased to $99.56 a barrel earlier in the day, the highest level since August 31. West Texas Intermediate crude for the United States fell 82 cents to close at $91.79. The price of a barrel earlier increased by 74 cents to reach its highest level since August 30 at $93.74. According to the Wall Street Journal, prices increased throughout the session due to reports that Chinese officials are considering reopening the economy from severe COVID-19 controls. However, they are moving slowly and have not set a deadline.
How Will the Market React?
According to Phil Flynn, an analyst with Price Futures Group, the market tends to believe that if China opens its economy, that will dramatically reduce supply and put more upward pressure on prices.
Futures were, however, negatively impacted by Chinese health officials’ weekend reaffirmation of their dedication to stringent COVID control efforts. China’s imports and exports unexpectedly shrank in October, while its crude oil purchases surged to their highest level since May. The U.S. dollar fell against the euro on Monday. It added to price support, while a risk-on attitude and a surge in European stock markets helped the sterling. Oil priced in dollars is less expensive for holders of other currencies due to the dollar’s decline, which contributes to price increases.
Even though refineries worldwide are increasing output, oil prices have been supported by anticipation of tighter supply until the European Union’s embargo on Russia’s seaborne crude shipments begins on December 5. According to Bob Yawger, director of energy futures at Mizuho in New York, there will be a barrel race in December, particularly in the eurozone. This quarter, U.S. oil refiners will run their facilities close to or at over 90% capacity. Meanwhile, Zhejiang Petroleum and Chemical Co (ZPC), the biggest private refiner in China, is increasing diesel production.
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