Oil prices rose early on Thursday after China signaled an easing of its strict Covid policy, which has battered market sentiment in recent months.
As of 6:46 a.m. ET on Thursday, WTI Crude prices were rising by 1.67% at $86.98, and the international benchmark, Brent Crude, was up 1.41% to trade at $93.72.
China’s strict Covid measures could be partially eased, which could be supportive of oil prices.
The Chinese city of Xi’an, for example, home to more than 13 million residents, has said it would implement Covid control measures only in risk areas instead of city-wide “static management”, CN Wire reported on Thursday, citing the city’s health authorities.
Just this past Sunday, Chinese President Xi Jinping signaled that the country’s zero-Covid policy would remain in place for the time being.
Yet, officials in China are discussing the idea of reducing the mandatory quarantine for travelers into China to seven from 10 days, Bloomberg News reported today, quoting sources with knowledge of the discussions.
The zero-Covid policy is not only isolating China from the rest of the world, but it weighs on market sentiment in the whole commodity complex, considering the fact that China is the world’s largest consumer of raw materials and the biggest importer of crude oil.
Early on Thursday, oil prices were up despite the announcement of more SPR releases coming, as there are concerns that the strategic reserves for emergencies are estimated to now contain oil for only 22 days of consumption in case of an actual emergency.
Prices were also pushed higher on Thursday by Wednesday’s weekly U.S. oil inventory report by the EIA, which showed a decline of 1.7 million barrels in crude oil, a small draw in gasoline stocks, and a slight increase in distillates.
Commenting on the weekly data, analysts at Saxo Bank noted on Thursday that “Four-week seasonal demand for distillate fuels soared to the highest since 2007 while inventories remained at the lowest point on record for this time of year.”
Despite the small increase of 124,000 barrels in distillate stocks, which include diesel, “there are still concerns going into winter over distillate inventories as they are at their lowest levels in at least 25 years for this time of year,” ING commodity strategists Warren Patterson and Ewa Manthey said on Thursday.
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By Tsvetana Paraskova for Oilprice.com
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