Oil rebounds on optimism over China’s revamp of COVID protocols

Oil prices rebounded on Thursday amid optimism over China’s easing of anti-COVID measures, recouping losses after slumping to the lowest levels so far this year in the previous session.

Brent crude futures rose $1 or 1.3 per cent at $78.17 per barrel by 0750 GMT, while US West Texas Intermediate (WTI) crude futures gained $1 or 1.4 per cent to $73.01 per barrel.

China on Wednesday announced the most sweeping changes to its resolute anti-COVID regime since the pandemic began, loosening rules that curbed the spread of the virus but sparked protests and hobbled the world’s second-largest economy.

Health officials are still warning, though, that they will closely watch trends in deaths and adequacy of medical resources in case a return to tougher measures is needed.

Brent settled on Wednesday below the year’s previous closing low touched on the first day of 2022, while US West Texas Intermediate crude fell to its lowest for the year.

Concerns of economic slowdowns weakening fuel demand continued to cap gains.

“It could be largely an attempt for prices to stabilise after the recent sharp sell-off, but an overall cautious environment could still be in place,” Jun Rong Yeap, market strategist at IG, told Reuters on Thursday.

He added that worries about demand would remain a key overhang for oil prices.

While US crude stocks fell last week, gasoline and distillate inventories surged, adding to concerns about easing demand.

Gasoline stocks grew by 5.3 million barrels in the week to 219.1 million barrels, and distillate stockpiles, including diesel and heating oil, swelled by 6.2 million barrels, the Energy Information Administration said on Wednesday.

US crude production also trended higher, rising to 12.2 million barrels per day last week, its highest level since August, the EIA said.

Meanwhile, Western officials are in talks with Turkish counterparts to resolve oil tanker queues off Turkey, a British Treasury official said, after the G7 and European Union rolled out new restrictions on Dec. 5 aimed at Russian oil exports.

At least 20 oil tankers continue to face delays to cross from Russia’s Black Sea ports to the Mediterranean as operators race to adhere to the Turkish rules.