Oil Up On China Recovery and US Lockdown News

(Bloomberg) -- Oil rose toward $41 a barrel in New York on optimism over China’s recovery from a virus-led demand crash and as advisers to President-elect Joe Biden ruled out a national lockdown to curb the spread of Covid-19.

China’s oil processing rebounded in October to match a record, while consumer spending rose and industrial production climbed faster than expected. Indications that the U.S. will target local measures rather than a nationwide lockdown to tackle the spread of the coronavirus also aided sentiment.

The oil market is drawing strength from a robust demand recovery in parts of Asia as the U.S. and Europe face a downturn due to a resurgent virus. Outside of China, Indian fuel consumption also posted a yearly increase last month.

Oil capped its biggest weekly advance since early October on Friday after news of a breakthrough on a Covid-19 vaccine that protects most people, although there is still uncertainty about how quickly it could be rolled out. Meanwhile, confirmed coronavirus cases in the U.S. surpassed 11 million and parts of Europe are back in lockdown, raising concerns about the demand outlook.

The pandemic’s impact on demand is likely to be a key focus at an OPEC+ committee meeting on Tuesday. While supply policy will be set at a major gathering at the end of the month, traders will be looking for any indications a planned easing of output cuts from next year will be delayed.

“The chatter on OPEC+ will grow increasingly loud over the next two weeks and will be the main driver of oil prices for the rest of November,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. The prospect of the U.S. avoiding a nationwide lockdown also removes a key market risk, he added.

Prices

West Texas Intermediate for December delivery gained 1.5% to $40.71 a barrel on the New York Mercantile Exchange as of 7:47 a.m. London time after dropping 2.4% on Friday Brent for January settlement rose 1.2% to $43.29 on the ICE Futures Europe exchange after losing 1.7% in the previous session

Brent’s three-month timespread was 61 cents a barrel in contango -- where prompt prices are cheaper than later-dated ones -- compared with $1 a week earlier. The narrowing spread indicates concerns about over-supply are easing.

China’s crude refining rose to 14.14 million barrels a day in October, matching a record set in June, as more plants processed oil to replenish inventories after a holiday demand boost. Meanwhile, total petroleum demand in India rose 2.7% last month from a year earlier, the first yearly increase since February.

Other oil-market news:

Twitter suspended the account of Iranian Oil Minister Bijan Namdar Zanganeh because it violated rules against impersonation, the company said. An official at Iran’s oil ministry, who asked not to be named, said the ban appeared to be linked to sanctions. Asia Pacific nations including China, Japan and South Korea on Sunday signed the world’s largest regional free-trade agreement, encompassing nearly a third of the world’s population and gross domestic product.

© 2020 Bloomberg L.P.