Oil futures rose early Friday, on track for weekly gains, as market bulls looked for signs China may soon move to ease COVID restrictions and allow economic growth to revive.
West Texas Intermediate crude for December delivery
rose $4.27, or 4.8%, to $92.44 a barrel, on track for a weekly gain of over 5%. A settlement around the current level would be the highest for a front-month contract since Oct. 7, FactSet data show.
January Brent crude
the global benchmark, gained $3.87, or 4.1%, to $98.54 a barrel on ICE Futures Europe. Prices were headed for a weekly rise of over 5% and their highest finish since late August.
Back on Nymex, December gasoline
rose 2.7% to $2.7654 a gallon, up nearly 8% for the week. December heating oil
gained 0.6% to $3.8903 a gallon, headed for a nearly 4% weekly advance.
December natural gas
was down nearly 0.1% at $5.971 per million British thermal units, on pace to book a weekly gain of nearly 5%.
Ongoing speculation around an easing of COVID-19 curbs in China provided support for crude.
A lot of “China-sensitive markets” started to rally overnight on reports of potential re-openings, including oil, copper
and the Hang Seng
which spiked up over 5%, Colin Cieszynski, chief market strategist at SIA Wealth Management, told MarketWatch.
The Wall Street Journal reported Friday that Zeng Guang, who was formerly the chief scientist at the Chinese Center for Disease Control and Prevention, said at a conference that there were expected to be “significant” changes to the company’s zero-COVID approach in 2023, according to multiple unnamed sources.
China’s COVID-zero policies of stringent lockdowns and other curbs have been seen as keeping a lid on crude prices in 2022.
“Oil prices are getting a bounce on the news as traders ultimately think of China more as a driver of upside to demand at some point next year when the reopening of the economy accelerates rather than as a current incremental driver of demand weakness. In other words, the light at the end of the COVID-zero tunnel is more attractive than today’s gloomy outlook,” said Stephen Innes, managing partner at SPI Asset Management, in a note.
Commodities then got another boost as the U.S. dollar began to “backslide, removing a big headwind for dollar-denominated commodity prices, after the U.S. employment report,” Cieszynski said. A decline from last month in U.S. hourly wage growth suggests that “hawkish pressure from a key component of inflation may be backing off.”
Meanwhile, the Journal reported that the U.S. and its allies had reached an agreement on which types of oil sales will be subject to a cap on Russian prices when new sanctions taking effect on Dec. 5.
Seaborne Russian oil will only be subject to the cap when its first sold to buyers on land, the report said, meaning resales won’t fall under the same cap. Intermediary trades of Russian oil that occur at sea would remain subject to the cap, while refined products, such as gasoline, would not.