Oil crawls higher on U.S. hopes, but COVID rise in China caps gains
Reuters · 14 Nov 2022 536 Views
Oil pump jacks at Vaca Muerta in Argentina
Oil pump jacks are seen at the Vaca Muerta shale oil and gas deposit in the Patagonian province of Neuquen, Argentina, January 21, 2019. REUTERS/Agustin Marcarian

MELBOURNE, Nov 11 (Reuters) - Oil prices rose on Friday as fears of a U.S. recession eased but were on track for weekly declines of more than 4% after a jump in COVID-19 cases in top oil importer China raised the spectre of weaker fuel demand.

Brent crude futures were up 23 cents, or 0.3%, to $93.80 a barrel at 0101 GMT, extending a 1.1% rise in the previous session.

U.S. West Texas Intermediate (WTI) crude futures rose 28 cents, or 0.3%, to $86.75 a barrel, after climbing 0.8% in the previous session.

So far this week, WTI has fallen more than 6%, while Brent has dropped nearly 5%.

Oil prices picked up on Friday as the U.S. dollar fell after data on Thursday showed inflation was weaker than expected, reining in expectations of rate hikes and boosting hopes of a soft landing for the world's biggest economy, analysts said.

A weaker U.S. dollar boosts oil demand as it makes the commodity cheaper for buyers holding other currencies.

However, analysts said price gains were capped by China continuing to pose a risk on the demand side, with COVID-19 cases on the rise in the manufacturing hub of Guangzhou, where authorities on Thursday urged residents to work from home.

"Since traders are hyper-sensitive to lockdowns in the world's largest oil importer, this could temporarily hold the oil market's top-side ambition in check. But unquestionably, we are in a much better place than yesterday," said Stephen Innes, managing partner at SPI Asset Management.

Besides work-from-home orders reducing mobility and fuel demand, travel across China remained subdued, with people concerned about getting caught up in quarantine, ANZ Research analysts said in a note.

Hopes that China was going to ease its zero COVID policy pumped up the oil market last week, but comments from health officials this week made it clear they would continue to strictly curb any outbreaks.

"With fresh lockdowns and restrictions still being implemented and the policy receiving support from President Xi Jinping at the Party Congress in late October, it's hard to see authorities deviating from the policy in the short term," Commonwealth Bank commodities analyst Vivek Dhar said in a note.

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