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Oil rises as speculation over OPEC cuts offset China concerns by

© Reuters

By Ambar Warrick– Oil prices jumped on Tuesday as traders bet that recent market weakness will invite more supply cuts from OPEC, while anti-government protests in China and hawkish signals from the Federal Reserve soured the outlook for demand.

Oil marked a volatile start to the week, initially falling as much as 3% as Chinese protests against the government’s strict zero-Covid policy intensified.

But prices rallied later in the session, finishing a shade higher on Monday as markets bet that the Organization of the Petroleum Exporting Countries (OPEC) will step in to support prices. The cartel is having its last meeting of the year to decide production.

jumped nearly 1[ads1]% to $84.09 a barrel, while they were flat around $77.27 a barrel at 21:09 ET (02:09 GMT).

Oil prices are currently trading below the levels that spurred October’s supply cuts by OPEC, raising hopes that the cartel will cut production when it meets this Sunday.

OPEC announced a cut of 2 million barrels per day in October to prop up prices, which had briefly brought oil close to $100 a barrel.

But concerns over weakened demand quickly pulled prices back, driving them to an 11-month low in recent sessions. Rising and falling demand in China was the biggest headwind to oil markets this year, while its strength also made crude oil shipments more expensive for major importers.

Hawkish signals from the Federal Reserve on Monday boosted the dollar and indicated pressure on the US economy, which could dampen appetite for crude oil. Fed members and both said Monday that the central bank is likely to start cutting interest rates well into 2024 and that more rate hikes were warranted to fight inflation.

Anti-government protests in China are now raising the prospect of more economic disruption in the world’s biggest crude oil importer. But some analysts argued that the protests could also pressure the government to relax its strict anti-COVID measures, which are the target of the protesters.

China is grappling with its worst-ever COVID outbreak, which could mean the government remains hesitant to relax its zero-COVID policy. The recent protests were sparked by the reimposition of anti-COVID restrictions in several major cities.

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