Oil Prices Extend Gains on Optimism Regarding Chinese Demand

China dropped parts of its strict COVID-19 protocols, boosting optimism for a resurgence in economic activity and demand in the world's top petroleum importer.

Brent crude futures rose 87 cents, or 0.9%, to $96.86 a barrel as of 00:41 GMT on Saturday.

Futures for U.S. West Texas Intermediate crude were up 80 cents, or 0.9%, at $89.76 per barrel.

China's National Health Commission changed COVID prevention and control techniques on Friday. This weekend, COVID instances rose in China.

"This policy change will help mitigate adverse expectations of a sustained restricted approach to onshore activity," said SPI Asset Management's Stephen Innes. "But it does not alleviate the immediate demand impact from existing lockdowns."

The limitations were eased by reducing quarantine periods for close contacts of cases and inbound travelers by two days and eliminating a penalty for airlines that carried ill passengers.

"The latest loosening of quarantine regulations is a step in the right direction," ING stated, "but the market will likely need additional easing if this optimism is to be sustained."

In December, Chinese refiners requested less oil from the world's top oil supplier, Saudi Arabia.

Separately, U.S. Treasury Secretary Janet Yellen said India can buy as much Russian oil as it wants, even at prices above a G7-imposed price restriction, as long as it avoids Western insurance, finance, and maritime services.

Stronger dollar capped oil price hikes.

Christopher Waller, governor of the U.S. Federal Reserve, said bad economic data would be needed to pause interest rate hikes that have boosted the dollar and lowered commodity prices.

Joe Biden and Xi Jinping will meet for the first time since Biden's inauguration in Bali before the G20 summit.