Oil Clings To Gains On Hope Of China Leading New Year Bull Market

Meanwhile, Russia imposes export restrictions in reaction to price cap: File Image/Pixabay

Oil on Tuesday maintained its recent gains due largely to bullish sentiment over China further relaxing its Covid restrictions – and analysts viewing the nation as a catalyst for a bullish New Year.

Brent was up 41 cents, or 0.5 percent, at $84.33 per barrel, while West Texas Intermediate crude settled 3 cents lower at $79.53 per barrel.

Amrita Sen, head of research at Energy Aspects, told Bloomberg Television that "China is going to be the biggest driver of oil prices next year" and said its decision to relax its zero-tolerance Covid measures would kindle both gasoline and jet fuel demand.

Sen was reacting to China's National Health Commission stating on Monday that it will stop requiring inbound travellers to go into quarantine starting Jan. 8 – a move viewed as a major step toward easing curbs on borders that have been largely shut since 2020.

Meanwhile in the U.S., the Christmas storm was responsible for at least part of oil's rally over the past few sessions, but Kazuhiko Saito, chief analyst at Fujitomi Securities, pointed out that the "forecast to improve this week, which means the rally may not last too long."

Indeed, about 450,000-500,000 barrels of oil per day was curtailed over the Christmas weekend in the Bakken oilfields, but on Tuesday Gulf Coast refineries began to resume operations and ramp up production following the Arctic blast.

In other oil related news on Tuesday, the saga of the European Union imposing a price cap on Russia for its invasion of Ukraine took another turn with news that the Kremlin was banning exports of Russian crude oil and refined products to foreign buyers that adhere either directly or indirectly to the cap.

The restriction will begin on Feb. 1 and last until at least July 2023, according to a decree published Tuesday, which Viktor Katona, an analyst at Kpler, called "too vague" and  "does not include any of Russia's signalled countermeasures, like setting a minimal price differential."

Alexander Novak, deputy prime minister of Russia, said on Friday that his country might cut oil output by up to 7 percent in early 2023 in response to the caps.