Crude values gain as China eases Covid restrictions

Front-month ICE Brent has increased by $0.23/bbl on the day from Friday, to $96.29/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman has said that OPEC and its allies will remain cautious when it comes to oil production due to "plenty of uncertainties" in the global economy. On the sidelines of the COP27 climate summit in Egypt, he told Bloomberg TV that the “jury is still out” on China easing its Covid-19 restrictions.

OPEC+ will hold its next meeting in Vienna on 4 December, one day before the G7 price cap on Russian oil sales is due to go into effect.

The National Health Commission of China has loosened the country's strict Covid regulations by revising quarantine requirements. Businesses will no longer have to halt production arbitrarily as a result of Covid-protocols in during an outbreak.

Less Covid restrictions could spur more economic activity and oil demand from the world's biggest oil importer. Coupled with concerns about tighter global supply, this may lead to an increase in Brent.

Downward pressure:

Nevertheless, China's guessing game continues to limit Brent price increases. Although its National Health Commission has offered a mild respite from strict Covid restrictions, no clear announcement has been made by the government about removing its zero-Covid policy. This keeps market sentiment in limbo.

China reported 14,000 new cases yesterday. Major Chinese cities such as Guangzhou are still under restrictions and mass testing is underway.

Several Chinese refiners have asked Saudi Aramco to half crude oil deliveries in December as “COVID-19 restrictions and a faltering economy have weakened China’s fuel demand," according to Reuters citing unnamed sources.

By Konica Bhatt

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