Oil Hits 3-week High on Easing COVID Curbs in China, US Production Shut-ins

Oil hit a three-week high yesterday, as China’s latest easing of COVID-19 restrictions spurred hopes of a demand recovery, and as production in the United States was hit by winter storms.

Brent crude was up $1.22 or 1.5 per cent, at $85.14 a barrel and the US West Texas Intermediate crude rose $1.06 to $80.62 per barrel, a 1.3 per cent gain.

Both benchmarks hit their highest level since December 5, earlier in the session. UK and US markets were closed on Monday for the Christmas holiday.

China would stop requiring inbound travellers to go into quarantine, starting January 8, the National Health Commission said on Monday in a major step toward easing curbs on borders that have been largely shut since 2020.

“This is certainly something that traders and investors have been hoping for,” Avatrade analyst Naeem Aslam said of China’s plan over the quarantine rule.

Meanwhile, frigid cold and blowing winds cut energy production from North Dakota to Texas due to freeze-ins that reduced supplies. Output of about 450,000-500,000 barrels of oil per day was curtailed over Christmas weekend in the Bakken oilfields, the North Dakota Pipeline Authority said.

“The US weather is forecast to improve this week, which means the rally may not last too long,” Saito, chief analyst at Fujitomi Securities, Kazuhiko said.

Some refineries along the Gulf Coast restarted operations and ramped up production.

Russian President Vladimir Putin had on Tuesday also signed a decree that bans the supply of oil and oil products to nations participating in the price cap from February 1, for five months. Concern over a possible production cut by Russia also provided price support.