Oil Mixed on Continued Worries for China COVID-19 Situation

November 30, 2022
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By Adedapo Adesanya

The crude oil grades were mixed yet again on Tuesday on expectations of a loosening of China’s strict COVID-19 controls, with Brent declining by 15 cents or 0.2 per cent to settle at $83.03 a barrel, and the United States West Texas Intermediate (WTI) appreciating by 96 cents or 1.2 per cent to $78.20 a barrel.

Chinese health officials said the country plans to speed up COVID-19 vaccinations for elderly people, aiming to overcome a key stumbling block in efforts to ease its zero-COVID curbs that had become unpopular.

The move is seen as a crucial element in a strategy to unwind nearly three years of strict curbs that have eroded economic growth, disrupted the lives of millions, and sparked unprecedented weekend protests.

The country’s National Health Commission (NHC) yesterday said it would target more vaccinations at people older than 80 and reduce to three months the gap between basic vaccination and booster shots for the elderly.

Prices also got support from the weakness in the US Dollar, which tends to trade inversely with oil. The Dollar index has fallen to 106.65 from a 20-year high as investors look toward the Federal Reserve reaching a peak rate early next year with inflation pressures expected to ease.

Oil prices were also hampered by concerns that the Organisation of the Petroleum Exporting Countries and allies, including Russia, known as OPEC+, would not adjust their output plans at their next meeting on December 4.

According to Reuters, five OPEC+ sources said the cartel is likely to keep the oil output policy unchanged at its Sunday meeting, while two sources said an additional production cut was also likely to be considered.

It was also gathered that neither, however, thought another cut was highly likely.

OPEC+ started to lower its output target by 2 million barrels per day in November, aiming to boost oil prices.

As the year enters the last month, markets are assessing the impact of a looming Western price cap on Russian oil.

Diplomats from the Group of Seven (G7) nations and the European Union (EU) have been discussing a cap on Russian oil between $65 and $70 a barrel, aiming to limit revenue to fund Russia’s military offensive in Ukraine without disrupting global oil markets.

So far, EU governments have failed to agree on the cap, with Poland insisting it should be set lower than the level proposed by the G7.

If there is no agreement, the EU is set to implement harsher measures agreed upon at the end of May – a ban on all Russian crude oil imports from December 5 and on petroleum products from February 5.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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