Oil prices climbed Thursday, bouncing after a recent selloff, on optimism of a boost in demand from China as well as signs the G7 price cap is resulting in delays to Russian crude exports.
By 09:00 ET (14:00 GMT), U.S. crude futures traded 3.6% higher at $74.62 a barrel, while the Brent contract rose 2% to $78.72.
Both contracts hit their 2022 lows on Wednesday, their fourth consecutive negative session.
China on Wednesday announced a widespread relaxation of its COVID-19 restrictions, with official case counts having dropped sharply in the last week and in the face of civil unrest over the strict and lengthy nature of the curbs.
China is the largest importer of crude in the world, but demand was hit as its economy grew just 3% in the first three quarters of this year, below the official target of 5%, depressed in part by the harsh COVID-related restrictions.
The implementation of the newly-announced anti-COVID adjustment measures will ensure the country’s economic growth will keep picking up pace, state media CCTV quoted Premier Li Keqiang as saying on Thursday.
On the supply side, there remain delays to shipments through the Bosporus Strait, with Reuters reporting at least 20 oil tankers faced additional time in crossing to the Mediterranean from Russia’s Black Sea ports as a result of the extra scrutiny needed following the G7 price cap.
Under the mechanism, EU companies are banned from insuring any Russian oil cargo bought for more than $60 a barrel.
The trading arm of Azerbaijan’s state oil firm SOCAR has paused purchases of Russian crude oil for its Turkish refinery, Reuters reported Thursday, as the firm seeks to remain compliant with Western sanctions.
U.S. crude inventories fell last week, according to data from the Energy Information Administration, but gasoline and distillate inventories rose, adding to concern about easing demand.
“EIA data show that U.S. commercial crude oil inventories dropped by another 5.2MMbbls over the last week, following a huge 12.6MMbbls of draw over the preceding week,” according to analysts at ING, in a note. “The drop in inventory withdrawals can be largely attributed to a slowdown in exports.”
“U.S. commercial crude oil inventory…now stands significantly below the 5-yr average of around 451.9MMbbls at this point in the season,” ING added.
