(Bloomberg) – Oil rose as Chinese officials debate relaxing some Covid rules, a policy that has weighed on its economy and energy demand.
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West Texas Intermediate for December rose 1.5% to trade above $85 a barrel after gaining 3% on Wednesday. Chinese bureaucrats are debating whether to reduce the time people entering the country must spend in mandatory quarantine, according to people familiar with the talks.
China’s Covid Zero strategy, which relies on mass testing and lockdowns to stamp out infections, added to the downside factors weighing on global crude demand this year. The policy change would have to be approved by senior leaders, so it could still be changed or not roll out at all, one person said.
“The possible easing of restrictions is certainly a positive signal for the market,” said Will Sungchil Yun, senior commodities analyst at VI Investment Corp. in China.”
There are still questions about China’s demand outlook, with the country’s oil purchases muted over the past trade cycle, even after refiners were given new quotas to export petroleum products. Infections have also swelled in Beijing to their highest level in four months, fueling concerns about potential brakes as the surge worsens amid the twice-a-decade Party Congress.
Crude was skewed by concerns over a global economic slowdown and the prospect of further tightening following OPEC+ production cuts from November. European Union sanctions on Russian maritime oil exports that come into effect in December have added another layer of supply uncertainty.
Chinese authorities are considering reducing the quarantine period to two days in a hotel and then to five days at home, the people said, asking not to be identified because the talks are private. Currently, China requires 10 days of isolation upon entry, including seven days in a hotel room and the remaining three days at home.
US President Biden on Wednesday confirmed the release of 15 million barrels from the US strategic reserve and said more supplies could be tapped, but did not announce any other actions such as limiting fuel exports.
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–With the help of Yongchang Chin.
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