China set to end zero clearing policy, WTI breaks through US$140 a barrel and hits 1-month high | Anue Juheng

Crude oil futures closed higher on Friday (June 3), with WTI crude topping $90 a barrel, closing at a one-month high, as market bulls weighed signs that China may soon ease restrictions to contain an epidemic and allow economic growth to improve.

energy commodity prices
  • WTI crude futures for December delivery rose $4.44, or 5%, to settle at $92.61 a barrel, up 5.4% for the week and the highest close for the latest month’s futures since October 7.
  • Brent crude for January delivery rose $3.90, or 4.1%, to settle at $98.57 a barrel, ending the week up 5.1% and hitting its highest since August 30.
  • Gasoline futures for December delivery rose 1.5% to settle at $2.7348 a gallon, up 6.7% for the week.
  • Thermal fuel oil futures for December delivery rose 1.3% to settle at $3.9148 a gallon, up 4.5% for the week.
  • Natural gas for December delivery increased 7.1% to settle at $6.40 per million Btu. The price of natural gas futures has been quite volatile in recent days, it once fell to a low of $5.893 per million Btu, but closed the week up 12.6%.
market driving force

The market continued to speculate that China will ease epidemic prevention restrictions, which gave support to crude oil.

Colin Cieszynski, chief market analyst at SIA Wealth Management, pointed out that many “China-sensitive markets” had rebounded overnight, including oil, copper and the Hang Seng (up more than 5%) following reports that China may reopen.

The Wall Street Journal reported on Friday that Zeng Guang, a former chief epidemiologist at the Chinese Center for Disease Control and Prevention, told a meeting that there will be significant changes to China’s epidemic prevention policy next year. At present, China adopts a policy of “zero out” of the new crown epidemic, so many cities and regions have been repeatedly closed and controlled, which has been one of the main reasons for stop crude oil prices in 2022.

Stephen Innes, manager of SPI Asset Management, said oil prices were being supported because “traders are finally seeing China as more of a driver of rising demand when the economy reopens sometime next year, rather than the increasing driver of the current weak demand.” In other words, the light at the end of the zero policy is more attractive than the current pessimistic outlook.”

Commodities got another boost after the US jobs report, Cieszynski said, after the dollar began to pull back, removing a major headwind for dollar-denominated commodity prices. The US jobs report showed that hourly earnings growth fell last month, suggesting “the hawkish weight of a key component of inflation may be easing.”

Meanwhile, the Wall Street Journal reported that the United States and its allies have reached an agreement on the content of new sanctions that will come into effect on December 5, the type of oil sales that will cap Russian oil prices.

According to reports, Russian oil shipped by sea will only be restricted when it is first sold to onshore buyers, meaning there will be no restriction on resale. Russian oil intermediate trades at sea will remain limited, while refined products such as gasoline are exempt from price caps.

“Russia has warned in the past that they will not go along with any artificial price caps, preferring to cut production and lower export volumes,” reported Robbie Fraser, Schneider Electric’s global research and analysis manager. “This threatens to push the market into undersupplied territory.”

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