Oil futures: Brent up 2% as China eases Covid travel restrictions

11 Nov 2022

Quantum Commodity Intelligence - Crude oil futures Friday extended the previous session's rebound as China indicated a significant step in relaxing Covid restrictions, while markets also continued to claw back the week's losses following the drop in US inflation figures.

Front-month January ICE Brent futures were trading at $95.61/barrel (1720 GMT), compared to Thursday's settle of $93.69/b but off from Friday's high of $96.92/b.  

At the same time, Dec22 NYMEX WTI was trading $88.59/b, versus Thursday's settle of $86.47/b and Friday's high of $90.10/b.

Headline US inflation fell to 7.7% in October, while the dollar index has since tumbled around 2.5%, dropping below 108 points for the first time since September and making dollar-denominated oil cheaper for importers.

"Oil prices are getting a reprieve from the weaker US dollar, and a significant repricing lower in US recession risk as a soft landing looks far more credible with the Fed likely to dial down," said Stephen Innes, managing partner SPI Asset Management.

Chinese authorities reported over 10,535 new domestically-transmitted cases for Thursday, the highest since April.

However, Beijing has cut the time travellers and close contacts of infected people must spend in quarantine, which analysts said is a significant move given the current outbreaks.

Travellers into China and close contacts will be required to spend five days in a hotel or government quarantine facility, followed by three days confined to home, versus the current rules requiring 10 days of quarantine in total, with a week in a hotel and then three days at home.

Last Friday, Dec WTI settled at $92.61/b for the Dec22 contract, up 5.35% on the week, while front-month Jan22 ICE Brent futures closed at $98.57/b, up 5.1%.

Meanwhile, fears over a looming diesel crunch this winter saw cargoes commanding record premiums over barges in northwest Europe, according to Quantum data.

ULSD cargoes were assessed Thursday at a record $99.50/mt above ULSD barges this week, from around $50/mt at the end of October and around flat at the start of last month.