# Oil prices rise as weaker dollar offsets China COVID-19 concerns
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-11-01
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Oil Prices Rise as Weaker U.S. Dollar Offsets COVID-19
Meta Description: Oil prices rose on Tuesday, as a weaker U.S. dollar offset COVID-19 curbs in China, boosting fuel demand amid OPEC+ output cuts and market dynamics.
URL: https://financedigest.com/oil-prices-rise-as-weaker-dollar-offsets-china-covid-19-concernshtml

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By Isabel Kua

SINGAPORE (Reuters) – Oil prices rose on Tuesday, paring losses from the previous session, as a weaker U.S. dollar offset widening COVID-19 curbs in China that have stoked fears of slowing fuel [demand in the world’s second-largest oil](https://www.financedigest.com/oil-gains-after-iea-sees-demand-rising-to-record-high.html "Oil gains after IEA sees demand rising to record high") consumer.

Brent crude for January delivery rose 73 cents, or 0.8%, to $93.54 a barrel at 0406 GMT. The December contract expired on Monday at $94.83 a barrel, down 1%.

U.S. West Texas Intermediate (WTI) crude rose 58 cents, or 0.7%, to $87.11 a barrel, after falling 1.6% in the previous session.

The Brent and WTI benchmarks both ended October higher, their first monthly gains since May, after the Organization of the Petroleum Exporting Countries and allies including Russia said they would [cut output by 2 million](https://www.financedigest.com/musk-says-tesla-price-cuts-triggered-demand-2023-sales-could-hit-2-million-vehicles.html "Musk says Tesla price cuts triggered demand, 2023 sales could hit 2 million vehicles") barrels per day (bpd).

Oil [prices cut](https://www.financedigest.com/tesla-expands-discounts-with-price-cuts-in-europe-singapore-israel.html "Tesla expands discounts with price cuts in Europe, Singapore, Israel") early losses as the U.S. [dollar weakened](https://www.financedigest.com/oil-up-2-as-dollar-weakens-on-small-us-fed-rate-hike.html "Oil up 2% as dollar weakens on small US Fed rate hike"), with the major global equity markets rising in today’s Asian session ahead of the U.S. Federal Reserve’s [rate decision](https://www.financedigest.com/wage-data-dents-dollar-recovery-before-fed-rate-decision.html "Wage data dents dollar recovery before Fed rate decision") later this week,” CMC Markets analyst Tina Teng said.

The greenback retreated on Tuesday from a one-week top against a basket of major peers, as traders weighed what message [Fed officials would deliver at Wednesday’s policy](https://www.financedigest.com/asian-shares-rise-dollar-dips-ahead-of-fed-policy-decision.html "Asian shares rise, dollar dips ahead of Fed policy decision") meeting.

A weaker dollar makes oil cheaper for holders of other currencies and usually reflects greater [investor appetite for risk](https://www.financedigest.com/stocks-rise-after-bank-sale-fuels-investor-risk-appetite.html "Stocks rise after bank sale fuels investor risk appetite").

[“OPEC+’s upcoming oil output cuts](https://www.financedigest.com/dollar-skids-after-soft-u-s-economic-data-impact-of-opec-cuts-fades.html "Dollar skids after soft U.S. economic data; impact of OPEC+ cuts fades") and the U.S.’s record oil export [data](https://www.financedigest.com/oil-jumps-on-lower-than-expected-us-inflation-data.html "Oil jumps on lower-than-expected US inflation data") also support oil prices fundamentally,” Teng said.

[OPEC raised its forecasts for world oil demand](https://www.financedigest.com/oil-prices-rebound-after-opec-upgrades-china-demand-outlook.html "Oil prices rebound after OPEC upgrades China demand outlook") in the medium-and longer-term on Monday, saying that $12.1 trillion of investment is needed to meet this demand despite the transition to renewable energy sources.

COVID-19 curbs in China forced the temporary closure of Disney’s Shanghai resort on Monday and have spurred worries of lower fuel demand in the [world’s top](https://www.financedigest.com/top-10-fastest-bikes-in-the-world.html "Top 10 fastest bikes in the world") crude oil importer as it persists with its zero-COVID policy.

Strict pandemic restrictions have caused China’s [factory activity to fall](https://www.financedigest.com/japans-factory-output-posts-biggest-fall-in-8-months-on-weak-autos-chips-sectors.html "Japan’s factory output posts biggest fall in 8 months on weak autos, chips sectors") in October and cut into its imports from Japan and South Korea.

Stephen Innes, managing [partner](https://www.financedigest.com/exclusive-crypto-giant-binance-moved-400-million-from-u-s-partner-to-firm-managed-by-ceo-zhao.html "Exclusive-Crypto giant Binance moved 0 million from U.S. partner to firm managed by CEO Zhao") at SPI Asset Management said that “the market has digested the latest string of China lockdowns.

The further we move into November, the closer we get to the EU-Russian oil embargo taking effect, which will have a material impact on [Russia’s supply](https://www.financedigest.com/exclusive-kazakh-mcdonalds-shut-outlets-temporarily-after-halting-supplies-from-russia-sources.html "Exclusive-Kazakh McDonald’s shut outlets temporarily after halting supplies from Russia – sources") and by extension global supply,” Innes said.

Keeping a check on [oil prices](https://www.financedigest.com/oil-ticks-up-as-u-s-inflation-cools-but-prices-set-for-monthly-drop.html "Oil ticks up as U.S. inflation cools, but prices set for monthly drop"), though, U.S. [oil output](https://www.financedigest.com/uk-oil-gas-firms-to-leave-years-worth-of-output-in-ground-with-tax-hikes-report.html "UK oil, gas firms to leave year’s worth of output in ground with tax hikes-report") climbed to nearly 12 million bpd in August, the highest since the start of the COVID-19 pandemic, even as shale companies said they do not expect production to accelerate in coming months.

That is likely to lead to a rise in U.S. [crude oil stocks](https://www.financedigest.com/oil-dips-after-fed-comments-us-crude-stock-build.html "Oil dips after Fed comments, US crude stock build") in the week to Oct. 28 of about 300,000 barrels, a preliminary [Reuters poll](https://www.financedigest.com/germany-home-prices-to-sink-nearly-6-this-year-reuters-poll.html "Germany home prices to sink nearly 6% this year – Reuters Poll") showed, while distillate and gasoline inventories were expected to fall.

The poll was conducted [ahead of reports](https://www.financedigest.com/uk-retailers-report-record-food-inflation-but-see-falls-ahead.html "UK retailers report record food inflation but see falls ahead") from the American Petroleum Institute due at 4:30 p.m. EDT (2030 GMT) on Tuesday, and the Energy Information Administration due at 10:30 a.m. (1430 GMT) on Wednesday.

(Reporting by Isabel Kua; Editing by Tom Hogue)


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