Oil set for weekly gain on signs of tight supply, China comeback

Oil headed for the biggest weekly gain since early October on signs of tightening supply and the prospect for improved Chinese demand, despite downward pressure from interest-rate hikes.

West Texas Intermediate futures traded near $76 a barrel and are up around 7 per cent this week. There are indications that Russian flows to Asia are dipping because of the price cap, while the International Energy Agency predicted this week that oil prices could rally next year as sanctions squeeze the nation’s supply.

China’s rapid dismantling of its Covid Zero policy has prompted optimism over the long-term outlook for commodities demand, although energy consumption in the near term is uncertain as virus cases surge across the country.

Oil is set to end the year slightly higher following a volatile period of trading that’s been exacerbated by a persistent lack of liquidity.

The market is still facing headwinds, with the European Central Bank echoing a warning from the US for more rate hikes, raising concerns of an economic slowdown.