After a string of weekly declines, this week crude oil prices are set to rise on news that China is easing Covid-related restrictions.
Indeed, Reuters reported earlier today that some Chinese cities where Covid cases are still on the rise are relaxing their testing and quarantine rules, following protests in several cities. In some of them, protesters clashed with police.
Bloomberg reported today that as a result of these developments, oil prices could register their biggest rise in nearly two months, helped by reports that the US administration may suspend sales of the strategic reserve of oil.
An earlier report said the Department of Energy was considering canceling or delaying sales of the SPR for the 2024 to 2027 period in a bid to buy time to rebuild reserves which have drastically diminished this year due to the program. release of 180 million barrels. aimed at lowering prices at the pump.
“It doesn’t make sense for us to release oil while we’re trying to fill the SPR,” Doug MacIntyre, deputy DoE director for the Office of Petroleum Reserves, said in testimony before the Committee on Oil. energy and natural resources. “We cannot fill and release from the same site at the same time.”
The DoE said it would begin filling the SPR when oil prices fall to $70 a barrel, “on a consistent basis,” according to energy security adviser Amos Hochstein.
West Texas Intermediate is currently trading above $80 a barrel, after falling to $76 a barrel last week amid growing concern over Chinese demand. However, it may take some time for prices to drop to $70. In fact, many analysts believe prices will rise from here.
Again, the main reason is China. If the easing of Covid measures continues, the market could see pent-up demand run wild as supply remains constrained, which could effectively drive prices much higher.
The G7 price cap on Russian oil will also not help keep prices lower after Russia said it would not sell oil to countries that apply the cap.
By Irina Slav for Oilprice.com
More reading on Oilprice.com: