Oil prices extend gains on China demand hopes

Oil prices rose nearly 1% on Monday, extending gains from the previous session as China eased some of its strict COVID-19 protocols, fuelling hopes of a recovery in economic activity and demand at the world’s top crude importer.

Brent crude futures rose 87 cents, or 0.9%, to $96.86 a barrel by 0041 GMT after settling up 1.1% on Friday.

U.S. West Texas Intermediate crude futures were at $89.76 a barrel, up 80 cents, or 0.9%, after closing Friday’s session 2.9% higher.

Commodities prices rallied on Friday after China’s National Health Commission adjusted its COVID prevention and control measures. But COVID cases climbed in China over the weekend.

“This policy pivot will help limit downside fears of a protracted restrictive approach to on-onshore activity, but it doesn’t eliminate the immediate demand hit from current lockdowns,” SPI Asset Management’s Stephen Innes said in a note.

The easing curbs included shortening quarantine times for close contacts of cases and inbound travellers by two days, as well as eliminating a penalty on airlines for bringing in infected passengers.

“The latest easing in quarantine requirements is certainly a step in the right direction, but the market will likely need to see further easing if this recent enthusiasm is to be sustained,” ING said in a note.

China’s demand for oil from world’s top exporter Saudi Arabia remained weak as several refiners have asked to lift less crude in December.

Separately, U.S. Treasury Secretary Janet Yellen said on Friday that India can continue buying as much Russian oil as it wants, including at prices above a G7-imposed price cap mechanism, if it steers clear of Western insurance, finance and maritime services bound by the cap.

However, a firmer dollar kept a lid on oil price gains.

U.S. Federal Reserve Governor Christopher Waller has said it would take a string of soft reports for the bank to take its foot off the brakes on interest rate hikes which have been driving up the dollar and depressing prices of commodities priced in the greenback.[MKTS/GLOB]

On Indonesian island Bali ahead of the G20 summit, U.S. President Joe Biden and Chinese leader Xi Jinping will meet in person on Monday for the first time since Biden took office.