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Oil futures ticked lower early Monday, with weakness tied in part to fading hopes China would relax curbs aimed at curtailing the spread of COVID-19.
Price action
-
West Texas Intermediate crude for December delivery
CL.1,
-0.60% CLZ22,
-0.60%
fell 38 cents, or 0.4%, to $92.23 a barrel on the New York Mercantile Exchange. -
January Brent crude
BRN00,
-0.51% BRNF23,
-0.51% ,
the global benchmark, was off 26 cents, or 0.3%, at $98.31 a barrel on ICE Futures Europe. -
Back on Nymex, December gasoline
RBZ22,
-1.00%
fell 1.2% to $2.703 a gallon, while December heating oil
HOZ22,
-1.42%
shed 1.1% to $3.872 a gallon. -
December natural gas
NGZ22,
+10.33%
jumped 9.6% to $7.014 per million British thermal units.
Market drivers
Speculation around the potential easing of COVID-19 curbs by China was credited with lifting oil futures last week. News reports over the weekend, however, said Beijing would largely stick to its policies.
Health officials on Saturday said China would stick to its “dynamic clearing” policies, Reuters reported. Asked about a potential change in policy in the near term, Hu Xiang, a disease control official, said the country’s measures are “completely correct, as well as the most economical and effective.”
China’s strict COVID curbs, which have resulted in sweeping lockdowns of major cities and regions, have been cited as a drag on crude demand.
Last week, it was a weaker U.S. dollar and “unverified reports of China looking to ease its zero-COVID policy which really provided the boost to markets,” said Warren Patterson, head of commodities strategy at ING, in a note. “It appears these reports were nothing more than a rumor, after the National Health Commission said that China will stick to its zero-COVID policy. Unsurprisingly, oil markets opened lower this morning, following these comments.”
Investors also noted China’s October trade data.
Crude oil imports in October averaged 10.2 million barrels a day, or mb/d, up from 9.83 mb/d in September and 8.9 mb/d in October last year, Patterson noted. It was the strongest monthly import figure since May, when 10.83 mb/d of inflows were seen. Crude oil imports over the first 10 months of the year are still down 2.7% versus the same stretch in 2021 to average 9.97 mb/d.
