HOUSTON: Oil hit a three-week high on Tuesday as China’s latest easing of COVID-19 restrictions spurred hopes of a demand recovery, and as production in the United States was hit by winter storms.
Brent crude was up $1.52, or 1.8%, at $85.44 a barrel by 11:30 a.m. EST (1630 GMT) and U.S. West Texas Intermediate crude rose $1.37 to $80.93 per barrel, a 1.7% gain.
Both benchmarks hit their highest level since Dec. 5 earlier in the session. UK and U.S. markets had been closed on Monday for the Christmas holiday.
China will stop requiring inbound travellers to go into quarantine, starting from Jan. 8, the National Health Commission said on Monday in a major step toward easing curbs on borders that have been largely shut since 2020.
“This is certainly something that traders and investors have been hoping for,” Avatrade analyst Naeem Aslam said of China’s plan over the quarantine rule.
Meanwhile, frigid cold and blowing winds cut energy production from North Dakota to Texas due to freeze-ins that reduced supplies. Output of about 450,000-500,000 barrels of oil per day was curtailed over Christmas weekend in the Bakken oilfields, the North Dakota Pipeline Authority said.
Putin bans Russian oil exports to countries that imposed price cap
“The U.S. weather is forecast to improve this week, which means the rally may not last too long,” said Kazuhiko Saito, chief analyst at Fujitomi Securities.
Some facilities were already being brought back online. TotalEnergies continued restarting its 238,000 barrel-per-day (bpd) Port Arthur, Texas, refinery on Tuesday, while Exxon Mobil Corp increased production levels on most units at its 369,024 barrel-per-day (bpd) plant in Beaumont, Texas.
Russian President Vladimir Putin on Tuesday also signed a decree that bans the supply of oil and oil products to nations participating in the price cap from Feb. 1 for five months. Concern over a possible production cut by Russia also provided price support.
Russia might cut oil output by 5% to 7% in early 2023 as it responds to price caps, the RIA news agency cited Deputy Prime Minister Alexander Novak as saying on Friday.