- China urges people to stay put over Lunar New Year
- U.S. sells 18 mln bbls crude from strategic reserves
- China agreed with U.S. on oil reserves release around February
- Crude still set to rise for fourth straight week
SINGAPORE, Jan 14 (Reuters) – Oil futures reversed losses on Friday on a weaker dollar although an imminent release of crude reserves from top importer China capped price gains.
Brent crude futures rose 32 cents, or 0.4%, to $84.79 a barrel at 0730 GMT. U.S. West Texas Intermediate crude gained 11 cents, or 0.1%, to $82.23 a barrel.
Crude prices turned positive as the dollar heads for its largest weekly fall in more than a year. A weaker dollar makes commodities more affordable for holders of other currencies.
However, gains were limited after Reuters reported that China plans to release oil reserves around the Lunar New Year holidays as part of a plan coordinated by the United States with other major consumers to reduce global prices.
The sources, who have knowledge of the discussion between the world’s top two crude consumers, said China agreed in late 2021 to release an unspecified amount of oil depending on price levels.
“China agreed to release a relatively bigger amount if oil is above $85 a barrel, and a smaller volume if oil stays near $75 level,” said one source, without elaborating.
The U.S. Energy Department said on Thursday it had sold 18 million barrels of strategic crude oil reserves to six companies, including Exxon Mobil and a unit of refiner Valero Energy Corp.
China has also posted in 2021 its first annual decline in crude oil shipments in two decades as Beijing clamped down on the refining sector and drew down massive inventories, although traders expect imports to recover this year.
There were also concerns about fuel demand at the world’s second-biggest oil consumer as the highly transmissible Omicron coronavirus variant has spread to the northeastern city of Dalian. China has suspended some international flights and stepped up efforts to rein in a virus outbreak at Tianjin.
Many cities, including Beijing, have also urged people not to travel during the Lunar New Year holiday, which could cool demand for transport fuel during a peak travel season.
“We expect oil imports to remain soft after China ordered private refineries to cut operating rates,” ANZ analysts said in a note.
Nevertheless, Brent and WTI prices are set to climb for a fourth week in a row, supported by supply and geopolitical concerns in Libya and Kazakhstan and a drop in U.S. crude inventories to 2018 lows.
Some investors are also optimistic that Omicron’s impact on the global economy and oil demand will be short-lived.
Several banks have forecast oil prices to hit $100 a barrel later this year as demand is expected to outstrip supply.
“The short-term outlook still has many risks, but optimism is high that it will be short-lived,” OANDA’s analyst Edward Moya said in a note.
However, with oil prices above $80, there is growing political pressure for the White House to lobby OPEC+ to hit their production quotas, he said.
“Biden may resort to another SPR release and while that won’t solve any problems, it could send WTI crude down to the $80 level,” Moya said.
Reporting by Florence Tan; editing by Himani Sarkar and David Evans