By Peter Nurse
Investing.com -- Oil prices rose Friday, boosted by a weaker dollar as well as renewed hopes for a quick relaxation to China's Zero-COVID policy, potentially lifting economic activity at the world’s largest crude importer.
By 09:25 ET (13:25 GMT), U.S. crude futures traded 4.5% higher at $92.11 a barrel, while the Brent contract rose 3.9% to $98.36.
Crude prices have climbed to their highest levels in nearly four weeks, helped by optimism that China is shortly to rein in its severe COVID mobility restrictions, which have been a big drag on the country’s economic growth this year.
Bloomberg reported Friday that Chinese authorities are looking at scrapping a system that penalizes airlines for bringing COVID-carriers into the country, while one of the country's top epidemiologists told an investment conference that he expects substantial changes to the policy within five or six months.
China’s health regulators have yet to confirm any changes, but this news adds more weight to unverified claims on Chinese social media earlier in the week that pointed to the government putting together a new committee to coordinate an exit from the policy.
Helping the oil market Friday was also the selloff in the U.S. dollar after the release of October’s official U.S. jobs report. Although this data showed that the U.S. economy added 261,000 jobs in October, above expectations for 200,000 jobs, the unemployment rate in the world's largest economy also increased to 3.7%, up from 3.5% last month.
The dollar index, which tracks the greenback against a basket of six other currencies, dropped over 1% to 111.532 Friday, falling back from the near two-week high of 113.15 reached overnight, as traders figured the rise in the unemployment rate could help persuade the Federal Reserve to ease back on its aggressive rate hiking cycle.
A weak greenback lifts demand for dollar-denominated commodities, like oil, by making it cheaper for foreign buyers.
Away from the demand side, supply is still expected to be tight, following the recent decision by the Organization of Petroleum Export Countries and allies, a group known as OPEC+, to cut output levels and a slide in U.S. crude stockpiles.
“The increasingly gloomy macro outlook is providing some strong headwinds to the oil market and without the supply cuts announced by OPEC+ back in October, we would likely have been trading at much lower levels,” said analysts at ING, in a note.
“In fact, OPEC+ cuts have provided some stability to the market in the short term,” ING added. “However, this is likely to change once the EU ban on Russian oil comes into force next month for crude and in February for refined products.”
In addition to the EU ban on Russian oil, U.S. officials and G7 countries have been in negotiations in recent weeks over a plan to put a price cap on sea-borne oil shipments, which is scheduled to take effect on Dec. 5.
This is designed to limit Moscow's ability to fund its invasion of Ukraine, but could also tighten crude supplies, as Russia has warned it will stop supplying oil to any countries that agree to the curbs.