China Eases COVID Limitations, U.S. Storm Fuels Supply Fears

China's latest loosening of COVID-19 limits boosted fuel demand expectations on Tuesday, but fears that winter storms throughout the United States are impacting energy supply continued to support prices.

At 07:12 GMT, Brent oil was up 52 cents, or 0.6%, to $84.44 a barrel, while U.S. West Texas Intermediate crude was up 48 cents, or 0.6%, to $80.04 per barrel. They reached their best level since December 5 early in the session.

Brent surged 3.6% on Friday, while WTI gained 2.7%, marking their largest weekly increases since October.

On Monday, British and American markets were closed for the Christmas holiday.

China will no longer need arriving travelers to undergo quarantine beginning on January 8, the National Health Commission announced on Monday, removing a regulation in place since the beginning of the epidemic three years ago. This increased expectations for a rise in crude oil demand from the largest importer.

China's oil demand is on the mend, which is wonderful news for the refining industry, according to Serena Huang, head of APAC analysis at Vortexa.

The U.S. dollar weakened when China said it will end its quarantine policy. A weakening dollar makes gasoline cheaper for foreign currency holders.

According to Kazuto Saito, chief analyst at Fujitomi Securities Co Ltd, fears of supply interruption due to winter storms in the United States are also supporting oil prices. The worries "prompted purchasing, despite the fact that many market players were on vacation," Saito noted.

The weather in the United States is expected to improve this week, so the rise may not continue long.

More than two dozen people were killed by a snowstorm that immobilized western New York over the Christmas weekend, according to local officials, as teams worked to dig out the region around Buffalo from its strongest winter storm in decades.

Passengers were stranded around the country during the holiday weekend as thousands of flights were canceled due to the bigger storm system.

On Friday, frigid temperatures and strong winds knocked out power and reduced energy output across the United States, forcing up rates for heating and electricity.

Concerns of a potential production decrease by Russia also contributed to the increase in oil prices.

In response to price ceilings, Russia may reduce oil production by 5 to 7 percent at the start of 2023, according to Deputy Prime Minister Alexander Novak, as reported by the RIA news agency on Friday.