Oil edges higher on tight supply, China demand recovery optimism

Southern Alberta oil well

Oil prices nosed ahead in early Asian trade on Thursday, lifted by signs of tighter supply and by optimism over a Chinese demand recovery.

U.S. West Texas Intermediate crude futures rose $2.20, or 2.74%, to $82.67. 

Brent crude futures rose $2.09, or 2.41%, to $88.73 per barrel.

The giant Chinese cities of Guangzhou and Chongqing announced an easing of COVID curbs on Wednesday, a day after demonstrators in southern Guangzhou clashed with police amid a string of protests against the world’s toughest coronavirus restrictions.

However, Chinese business activity shrank further in November, official PMI data showed on Wednesday, raising fears about next year.

Crude oil supply is expected to remain tight.

U.S. crude oil stocks plunged by nearly 13 million barrels, the most since 2019, in the week ended Nov. 25, according to the Energy Information Administration. However, U.S. crude oil output surpassed 12 million barrels a day, the highest since before the onset of the coronavirus pandemic, the EIA said.

The U.S. Federal Reserve Chair Jerome Powell said on Wednesday it was time to slow the pace of coming interest rate hikes, which could support oil prices.

Capping gains, the OPEC+ decision to hold its Dec. 4 meeting virtually signals little likelihood of a policy change, a source with direct knowledge of the matter told Reuters on Wednesday.

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