A view shows oil tanks of Transneft oil pipeline operator at the crude oil terminal Kozmino on the shore of Nakhodka Bay near the port city of Nakhodka, Russia August 12, 2022. REUTERS/Tatiana Meel/File Photo
Reuters – December 1, 2022

Oil rose about $2 a barrel on Thursday after top crude importer China eased COVID curbs in two major cities, while the U.S. dollar slumped on the view that the Federal Reserve might slow down on interest-rate hikes.

The shift in China’s zero-COVID strategy raised optimism about a recovery in oil demand there. The cities of Guangzhou and Chongqing announced an easing of COVID curbs on Wednesday.

Brent crude was up $1.74, or 2%, at $88.71 a barrel by 11:24 am EDT (1624 GMT) . U.S. West Texas Intermediate crude futures added $2.20, or 2.7%, to $82.75.

“Oil markets are going to continue to be buffeted by ongoing news out of China, given how much of an impact ongoing lockdowns are having on oil demand in the world’s second-largest consumer,” said Matt Smith, lead oil analyst at Kpler.

The dollar index slumped to its lowest since August after the U.S. Federal Reserve Chair Jerome Powell said rate hikes could slow this month. A weaker dollar makes oil cheaper for other currency holders.

Crude prices were also supported by hopes of another potential output cut from the Organization of the Petroleum Exporting Countries (OPEC) and allies, a group known as OPEC+, which meets on Dec. 4.

On Wednesday, sources called a policy change unlikely, but some feel a further cut cannot be ruled out.

“I believe the OPEC+ meeting forces shorts to cover, but the consensus is unchanged quota levels,” said Tamas Varga, of oil broker PVM.

Both oil benchmarks are on target for their first weekly gains after three consecutive weeks of decline. Brent touched $80.61 Monday, lowest since Jan. 4.

The prospect of a lower price cap on Russian oil is also lending support, analysts said. European Union governments tentatively agreed on Thursday on a $60 cap on Russian sea-borne oil, with an adjustment mechanism to keep the cap at 5% below the market price, an EU diplomat said.