Oil steadied as investors assessed the outlook for rising demand in the wake of China’s reopening, the US dollar eased, and risks to Russian energy supplies came into sharper focus with fresh curbs looming.
(Bloomberg) — Oil steadied as investors assessed the outlook for rising demand in the wake of China’s reopening, the US dollar eased, and risks to Russian energy supplies came into sharper focus with fresh curbs looming.
West Texas Intermediate held above $81 a barrel following two weekly gains that drove the US benchmark to the highest close since mid-November. While a weaker US currency supported crude prices on Monday, trading volumes in Asian hours were held back, with national holidays to mark the Lunar New Year in many key markets including China and Singapore.
China’s shift away from Covid Zero has bolstered expectations that consumption in the largest importer will expand. Following the pivot, many more Chinese people traveled back to their hometowns for the lunar festival this year, and industrial activity is expected to pick up when workers return.
Oil has shaken off a weak start to the new year to move higher as China’s outlook brightened. Additional support for crude has come from expectations that the Federal Reserve is close to ending its series of aggressive rate hikes, which has weakened the US currency. Traders are also weighing the impact of additional curbs on Russian energy flows as the war in Ukraine grinds on.
US Treasury Secretary Janet Yellen expressed confidence at the weekend that restrictions on Russian sales of crude oil can be expanded to refined petroleum products, while acknowledging that the task will be more complicated. At the same time, Moscow will soon publish a decree detailing the ban on Russian companies selling oil to clients adhering to the cap, Kommersant reported.
SLB, the last of the major oilfield-service providers doing business in Russia, warned last week that drilling and related work in the country will slump this year as its international isolation deepens. In its latest outlook, the International Energy Agency said Russia will shut in about 1.6 million barrels a day of production by the end of this quarter compared with pre-invasion levels.
Elements, Bloomberg’s daily energy and commodities newsletter, is now available. Sign up here.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.