Oil Rises, Bolstered by Speculation of China’s Economy Reopening
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(Bloomberg) -- Oil gained on speculation that China is preparing to gradually exit the country’s Covid-Zero policy.
West Texas Intermediate futures rose 2.1% to settle above $88 a barrel after losing ground in the previous two sessions. Oil followed global stock markets higher after an unverified social media post triggered speculation Beijing is looking to phase out Covid restrictions -- despite the country’s Foreign Ministry saying it was unaware of such a plan. A weakening dollar also supported prices, with commodities priced in the currency more attractive to buyers.
“Potential changes to China’s Covid policy -- real or speculated -- will create volatility in crude trading,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Management. But she cautioned that if “investors did think that China was changing their COVID policy, the move higher would be much more significant.”
While oil is down by almost a third since early June, futures ended October higher in the first monthly gain since May -- buoyed by the OPEC+ output cut agreement. The group’s Secretary-General Haitham Al Ghais said Monday the cuts were necessary because economic uncertainty would lead to excess supplies. But the supply outlook is clouded by impending European Union sanctions on Russian crude flows set to take effect from Dec. 5.
“We’re in a tale of two markets,” Joe McMonigle, the International Energy Forum’s secretary-general, told Bloomberg TV at the Adipec conference in Abu Dhabi. “The physical markets are very tight. The paper markets are pricing in bad economic news and a bad recession.”
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