Oil up nearly 2pc as weaker dollar offsets China concerns

NEW YORK: Oil prices rose on Tuesday, recouping losses from the previous session, on optimism that China, the world's second-largest oil consumer, could reopen from strict Covid curbs.

Brent crude for January delivery rose $1.53, or 1.7 percent, to $94.34 a barrel at 12:01 p.m. EDT. The December contract expired on Monday at $94.83 a barrel, down 1 percent.

U.S. West Texas Intermediate (WTI) crude rose $1.60, or 1.85 percent, to $88.13 after falling 1.6 percent in the previous session.

An unverified note trending in social media, and tweeted by influential economist Hao Hong, said a "Reopening Committee" has been formed by Politburo Standing Member Wang Huning, and is reviewing overseas COVID data to assess various reopening scenarios, aiming to relax COVID rules in March, 2023. Hong Kong and China stocks jumped on the rumors.

A Chinese foreign ministry spokesman later said he was unaware of the situation.

"Talk on this is gathering some momentum," said Bob Yawger, director of energy futures at Mizuho in New York. "That would definitely be a positive demand event."

The Brent and WTI benchmarks both registered monthly gains in October, their first since May, after the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, cut their targeted output by 2 million barrels per day (bpd).

The OPEC+ cuts and record U.S. oil export data also support oil price fundamentals, said CMC Markets analyst Tina Teng.

Tamas Varga of oil broker PVM, meanwhile, said that dwindling oil supply, a possible halt to release of oil from the Strategic Petroleum Reserve (SPR) and reinvigotated oil demand growth could also send crude back above $100 a barrel.

An oil investment lag is sowing seeds for a future energy crisis, OPEC secretary General Haitham Al Ghais said on Tuesday.

OPEC raised its forecasts for world oil demand in the medium and longer term on Monday, saying that $12.1 trillion of investment is needed to meet this demand.

These bullish factors have offset demand concerns raised by Covid-19 curbs that lowered China's factory activity in October and cut into its imports from Japan and South Korea. In a further cap to price gains, U.S. crude oil stocks are likely to rise in the week to Oct. 28, a preliminary Reuters poll showed. —News Desk