By Adedapo Adesanya
The crude oil market traded mixed on Thursday, retreating from an early rally built on weakness in the US Dollar and hopes for improved fuel demand in China after COVID-19 curbs were eased in two major Chinese cities.
Brent crude futures settled 9 cents lower at $86.88 a barrel, while the US West Texas Intermediate (WTI) crude futures settled 67 cents higher at $81.22 a barrel.
The shift in China’s zero-COVID strategy raised optimism about a recovery in oil demand there. The cities of Guangzhou and Chongqing announced an easing of COVID curbs on Wednesday.
Demonstrations in the world’s largest oil importer, which spread over the weekend to Shanghai, Beijing and elsewhere, have become a show of public defiance unprecedented since President Xi Jinping came to power in 2012.
The southwestern city of Chongqing will allow close contact with people with COVID-19 who meet certain conditions to quarantine at home.
Guangzhou, near Hong Kong, also announced an easing of curbs, but with record numbers of cases nationwide, there seems little prospect of a major reversal in the zero-COVID policy.
Oil was however supported through most of Thursday’s session by a slump in the dollar index to its lowest since August after the US Federal Reserve Chair Jerome Powell said rate hikes could slow this month.
A weaker dollar makes oil cheaper for other currency holders.
The greenback dipped to 16-week lows against a basket of major currencies on Thursday after data showed that US consumer spending increased solidly in October while inflation moderated, adding to expectations that the Federal Reserve is closer to reaching a peak in interest rates.
Mr Powell said on Wednesday that it was time to slow rate hikes, noting that slowing down at this point is a good way to balance the risks.
The prospect of a lower price cap on Russian oil is also lending support, analysts said. European Union governments tentatively agreed on Thursday on a $60 cap on Russian sea-borne oil.
Meanwhile, the market will await what the meeting of the Organisation of the Petroleum Exporting Countries (OPEC) and allies, OPEC+, will bring come December 4, although a policy change is seen as unlikely.
“OPEC+ would rather sit on the bench at this time and assess the outcome of what happens on Monday,” an unnamed source told the news agency, Reuters, this week.
OPEC also made a meeting of its ministers planned for Saturday a virtual gathering, and OPEC+ cancelled a meeting of oil market experts, the Joint Technical Committee, that had been scheduled for Friday.
