Crude gained further support after the Federal Reserve chair opened the door to a slowdown in the pace of rate hikes
01 December 2022 - 12:06
byAlex Lawler
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
London — Oil rose on Thursday supported by investor wariness that Opec+ may cut supply further at its meeting on Sunday and as easing Covid curbs in China raised the hope of higher demand in the world’s top crude importer.
Crude gained further support, and the dollar weakened, after the Federal Reserve chair opened the door to a slowdown in the pace of rate hikes. Dollar weakness makes oil cheaper for other currency holders and tends to support risk assets.
Oil cartel Opec and allies including Russia, known as Opec+, meets on December 4. While sources said on Wednesday a policy change was unlikely, some analysts say a further cut cannot be ruled out.
“Oil is finding support on investor optimism that Opec+ will deliver further cuts in production when they meet,” Ehsan Khoman, analyst at MUFG Bank, said in a report.
Brent crude was up 44c, or 0.5%, to $87.41 a barrel by 9.18am GMT, while US West Texas Intermediate crude futures added 55c, or 0.7%, to $81.10.
Both benchmarks have posted three consecutive weekly declines, though the market has rebounded strongly this week after hitting the lowest in nearly a year on Monday. Brent then touched a low of $80.61, the lowest since January 4.
The prospect of a lower price cap on Russian oil was also supporting the market, analysts said. EU countries are inching towards a deal on the price cap ahead of a December 5 deadline.
“Barring any negative surprise during Sunday’s virtual Opec+ talks and assuming a healthy compromise on the Russian oil price cap before the EU sanctions kick in on Monday it is tempting to audaciously conclude that the bottom has been found,” said Tamas Varga of oil broker PVM.
“Inflation has not been defeated but its negative economic impact has probably been mitigated.”
Sentiment was also lifted by the shift in China’s zero-Covid strategy, which raises optimism over Chinese oil demand recovery. The cities of Guangzhou and Chongqing announced an easing of Covid curbs on Wednesday.
A slide in US crude inventories in weekly data added further price support.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Chance of Opec+ cutting supply lifts oil
Crude gained further support after the Federal Reserve chair opened the door to a slowdown in the pace of rate hikes
London — Oil rose on Thursday supported by investor wariness that Opec+ may cut supply further at its meeting on Sunday and as easing Covid curbs in China raised the hope of higher demand in the world’s top crude importer.
Crude gained further support, and the dollar weakened, after the Federal Reserve chair opened the door to a slowdown in the pace of rate hikes. Dollar weakness makes oil cheaper for other currency holders and tends to support risk assets.
Oil cartel Opec and allies including Russia, known as Opec+, meets on December 4. While sources said on Wednesday a policy change was unlikely, some analysts say a further cut cannot be ruled out.
“Oil is finding support on investor optimism that Opec+ will deliver further cuts in production when they meet,” Ehsan Khoman, analyst at MUFG Bank, said in a report.
Brent crude was up 44c, or 0.5%, to $87.41 a barrel by 9.18am GMT, while US West Texas Intermediate crude futures added 55c, or 0.7%, to $81.10.
Both benchmarks have posted three consecutive weekly declines, though the market has rebounded strongly this week after hitting the lowest in nearly a year on Monday. Brent then touched a low of $80.61, the lowest since January 4.
The prospect of a lower price cap on Russian oil was also supporting the market, analysts said. EU countries are inching towards a deal on the price cap ahead of a December 5 deadline.
“Barring any negative surprise during Sunday’s virtual Opec+ talks and assuming a healthy compromise on the Russian oil price cap before the EU sanctions kick in on Monday it is tempting to audaciously conclude that the bottom has been found,” said Tamas Varga of oil broker PVM.
“Inflation has not been defeated but its negative economic impact has probably been mitigated.”
Sentiment was also lifted by the shift in China’s zero-Covid strategy, which raises optimism over Chinese oil demand recovery. The cities of Guangzhou and Chongqing announced an easing of Covid curbs on Wednesday.
A slide in US crude inventories in weekly data added further price support.
Reuters
Rand is muted as investors assess Cyril Ramaphosa’s future in office
JSE may extend rally as Fed signals slower policy- tightening pace
MARKET WRAP: JSE soars on hopes of China easing stringent Covid measures
WATCH: Market Report
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.