Oil jumps to highest in 3 weeks as China easing its Covid curbs

Oil jumped to the highest in more than three weeks as markets rallied over China easing its Covid restrictions.

Brent crude futures surged more than 4% to near $99 a barrel, with China, the world’s biggest crude importer, said to be working on plans to scrap a system that penalises airlines for bringing virus cases into the country.

Oil has swung in recent sessions, with lackluster trading volumes rendering futures especially susceptible to macro market moves. Adding to volatility is the push and pull between a tightening supply outlook heading into winter and concerns over a global economic slowdown.

China’s Covid Zero strategy, which relies on lockdowns and mass testing to stamp out infections has weighed heavily on the nation’s economy this year. Oil demand in 2022 is seen falling by 400,000 a barrels a day due to the virus curbs, according to Bank of China International Ltd. analysts.

“With China’s easing some Covid restrictions especially for air travel most traders are taking the news as a positive pull to demand in the near future,” said Dennis Kissler, senior vice president at Bok Financial Securities.

Meanwhile, Saudi Arabia trimmed its oil prices for December sales to Asia, highlighting some concern over the outlook for demand. The kingdom sells most of its crude under long-term contracts to the region. However, the Opec+ alliance will make sizable cuts to output from this month, which will be followed by European Union sanctions on Russian crude flows from December.

Rising interest rates and strict virus-related lockdowns in China have hit energy consumption, causing a 20% drop in crude futures since June.

State-controlled Saudi Aramco cut its key Arab Light grade for December sales to Asia, its main market, by 40 cents to $5.45 a barrel above the regional benchmark. The move was in line with refiners and traders’ prediction of a 35-cent drop, according to a Bloomberg survey.

—Bloomberg