Oil rallies over 2% on China reopening, OPEC holds output steady

Oil prices rose sharply on Monday as more Chinese cities began relaxing strict anti-COVID measures, ramping up hopes for a full reopening, while the OPEC kept production steady at its latest meeting, 

Several Chinese cities, including economic hubs Shanghai and Beijing, relaxed some movement and testing measures over the past week, drumming up hopes for a nationwide reversal. Reports also suggested that the government is planning to announce such a move in the coming weeks.

Such a scenario would be positive for crude markets, given China’s status as the world’s largest oil importer. Dwindling demand in the country due to its strict anti-COVID policies was a major source of selling pressure on oil markets this year.

Brent oil futures jumped 2.3% to $87.38 a barrel in early Asian trade, while West Texas Intermediate crude futures surged 2.1% to $81.66 a barrel. Crude prices also logged strong gains last week, as Chinese cities began scaling back some anti-COVID measures.

A widespread reopening in China still appears to be a distant prospect, given that the country is grappling with record-high daily increases in infections.

But the imposition of lockdown measures sparked a wave of unprecedented protests across the country, which now appears to have pushed the government into relaxing some curbs.

Crude markets had logged big swings in the past week in anticipation of the OPEC meeting, which is its last for the year. The cartel will now meet only in February 2023 to decide on future production, although it will then have much more data on a Chinese reopening and global economic trends. 

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