Oil Rises as Dollar Weakens, Traders Watch China’s COVID Policy

Oil futures rose on Tuesday, looking to build on an October gain, as the U.S. dollar retreated and unconfirmed rumors swirled that China could ease COVID restrictions.

price action
  • West Texas Intermediate crude for December delivery CL.1,
    +3.19%

    CL00,
    +3.19%

    CLZ22,
    +3.19%
    rose $1.16, or 1.3%, to $87.69 a barrel on the New York Mercantile Exchange.

  • January Brent crude BRN00,
    +2.87%

    BRNF23,
    +2.87%,
    the global benchmark, rose $1.18, or 1.3%, to $93.99 a barrel on ICE Futures Europe.

  • Back to Nymex, December gasoline RBZ22,
    +3.23%
    rose 1.4% to $2.561 per gallon, while December HOZ22 heating oil,
    +0.55%
    rose 0.2% to $3.683 per gallon.

  • December natural gas NGZ22,
    -5.59%
    fell 2.1% to $6.22 per million British thermal units after jumping more than 10% on Monday.

Market factors

The Wall Street Journal reported on Tuesday that Hong Kong stocks appeared to be rallying after an anonymous post on Chinese social media suggested the government may intend to ease pandemic-related restrictions from March. . Other media also reported the rumor.

See: Alibaba and Nio among booming Chinese stocks as hopes grow over potential reopening

China’s COVID restrictions have been seen as a ceiling on oil prices, limiting demand for crude from one of the world’s largest energy consumers.

WTI rose 8.9% in October, based on first-month contracts, while Brent gained 7.8%, with some support attributed to a move by the Organization of the Petroleum Exporting Countries and of its Russian-led allies, a combo known as OPEC+, to cut production by 2 million barrels a day from November. The actual reduction should be about half as several members were already producing below their targets.

“Obviously, the supply cuts announced by OPEC+ have stabilized the oil market to some degree. However, stabilization of this action in the medium to long term will really depend on the full impact of the EU ban. on Russian Oil,” which goes into effect Dec. 5 for crude oil and Feb. 5 for refined products, Warren Patterson, head of commodities strategy at ING, said in a note.

The ICE US Dollar Index DXY,
-0.68%,
a measure of the currency against a basket of six major rivals, fell 0.6%. The sharp rise in the dollar in 2022 was also seen as a hurdle for oil bulls. A stronger dollar makes commodities valued in the unit more expensive for users of other currencies.

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