By 
U.S. oil futures settled higher Tuesday, finding support as signs China might loosen COVID-19 restrictions helped ease worries about energy demand.
Speculation that major oil producers may agree to cut production at a meeting on Sunday also contributed to the day’s gains for the U.S. crude benchmark, analysts said.
Price action
West Texas Intermediate crude for January delivery
CL.1,
+1.50%
CL00,
+1.50%
CLF23,
+1.50%
rose 96 cents, or 1.2%, to settle at $78.20 a barrel on the New York Mercantile Exchange. On Monday, prices based on the front-month contracts touched their lowest intraday level since December, but finished higher.
January Brent crude
BRNF23,
+0.28%,
the global benchmark, declined by 16 cents, or 0.2%, to settle at $83.03 a barrel on ICE Futures Europe. February Brent
BRN00,
+0.23%
BRNG23,
+0.23%,
the most actively traded contract, rose 36 cents, or 0.4%, to $84.25 a barrel.
December gasoline
RBZ22,
+0.05%
rose nearly 0.1% to $2.3321 a gallon, while December heating oil gained 2.5% to $3.2959 a gallon.
January natural gas
NGF23,
+1.03%
rose 0.5% to $7.235 per million British thermal units.
Market drivers
China’s National Health Commission announced a push to vaccinate the elderly and cut the number of times between boosters to three months for over 80-year-olds, as the country deals with its worst virus outbreak thus far in the pandemic.
“The announcement follows unprecedented street protests against President Xi [Jinping], and is the first indication that Beijing may be considering a relaxation of its draconian Covid-control policies. The prospect of a return to normality, in an economy that is the world’s largest oil importer, was enough to make oil prices jump, in the first significant price rebound of the last two weeks,” said Ricardo Evangelista, senior analyst at ActivTrades, in a note.
Oil had fallen sharply early Monday, with the U.S. benchmark briefly erasing its 2022 gains, as protests across China in response to the country’s strict COVID-19 restrictions sparked fears of a crackdown and a further hit to crude demand. Oil later bounced, finishing higher, amid speculation about the potential for a deeper cut in production by OPEC+.
See: U.S. oil taps its lowest price of the year thanks to China as OPEC+ output decision looms
There’s “increased chatter” in the energy space that the Organization of the Petroleum Exporting Countries and its allies will cut production at the Dec. 4, meeting, said Robert Yawger, director of energy futures at Mizuho Securities USA, in a Tuesday note.
OPEC+ delegates said additional reductions to output could be an option, following a 2 million-barrel-a-day cutback last month, according to a recent Bloomberg report.
Just two weeks ago, there were reports the OPEC+ may decide to add 500,000 barrels to help compensate for the Dec. 5 European Union embargo on Russian barrels, said Yawger. However, global benchmark Brent crude touched its lowest price since January on Monday.
OPEC+ will reportedly hold a virtual gathering Sunday instead of meeting in person. “Opting for no-drama optics seemingly increases the likelihood of a rollover decision,” Helima Croft, head of global commodity strategy and MENA research at RBC Capital Markets, wrote in a note Tuesday.
OPEC+ may also be hoping to steer clear of a “media maelstrom” one day before the European Union’s latest package of sanctions, including a ban on Russian oil, kicks in on Dec. 5, said Croft.
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