Oil prices rose to a three-week high on Tuesday as China’s loosening of COVID-19 restrictions boosted fuel demand hopes and concerns that winter storms in the US were affecting power production continued to push prices higher.
Brent crude rose 88 cents, or 1.1%, to $84.80 a barrel, while West Texas Intermediate (WTI) crude was up 88 cents, or 1.1%, to $80.44 a barrel. The two benchmarks hit their highest levels since Dec. 5 in the early part of the session.
Brent was up 3.6% on Friday, while WTI was up 2.7%. Both indicators posted their biggest weekly gains since October. UK and US markets were closed on Monday for the Christmas holiday.
China will end quarantine requirements for arriving travelers from January 8, repealing the rule that has been in place since the outbreak began three years ago, the National Health Commission said on Monday. This spurred optimism about higher demand from the largest crude oil importer.
The dollar softened on Tuesday following this statement. A weaker dollar makes oil cheaper for holders of other currencies and generally increases investors’ risk appetite.
The number of death from the storm that froze the United States for days increased. Deadly snowstorm paralyzed Buffalo, New York on Christmas Day, leaving drivers and rescuers stranded in their vehicles.
Freezing cold and blowing winds cut electricity across the United States on Friday. Heating and electricity prices rose as energy production was cut off.
Airlines canceled nearly 2,700 US flights on Saturday afternoon after weather conditions affected airport operations nationwide.
Fears of supply disruption from winter storms in the US triggered buying, but trading stayed weak as many market participants were on vacation.
However, the weather is expected to improve this week in the US, which means the rally may not last long.
Worries about Russia’s possible production cuts also contributed to the gains.
Deputy Prime Minister Alexander Novak said on Friday that Russia could cut oil production by 5% to 7% in early 2023 in response to price ceilings.
