Oil stocks bounced Tuesday, following Monday's turnabout session, as Chinese authorities altered their Covid strategy and markets looked toward a pending meeting of the Organization of Petroleum Exporting Countries.
U.S. oil prices dipped on Monday nearly to 12-month lows as protesters in China focused international attention on the country's strict Covid policy. Oil markets worried that that protests and a rising surge of Covid illness could lead to further manufacturing disruptions and reduced demand for oil.
However, U.S. crude oil prices reversed Monday's early losses, settling up 1.2% to $77.24 per barrel. Crude jumped almost 3% early Tuesday, climbing back above $79 a barrel.
The reversal came after Chinese authorities announced they would vaccinate more senior citizens, a move seen by many as key to ending the country's cycle of Covid flare ups. Authorities avoided any mention of reopening the economy, but a National Health Commission spokesmen warned local authorities against further harsh Covid restrictions.
China Protest Impact On Oil Stocks
Monday's fall in oil prices and oil stocks followed reports that hundreds of protesters marched Sunday in Beijing and in Shanghai. Protests appear to also have taken place in the eastern city of Nanjing and in Wuhan, the original epicenter of Covid-19.
Protests increased as President Xi Jinping held to a strict zero-Covid policy, with repeated lockdowns and mandatory testing and other measures. Over the weekend, there were reports of widespread protests throughout the country, with videos of demonstrations circulating online.
Some protesters called for Xi to step down, according videos that have been verified authentic by the Wall Street Journal.
China is a top crude importer and an important indicator for the global oil demand outlook. Oil stocks and oil-related stocks responded Monday.
Stocks with strong China exposure, including Apple, Nike and Caterpillar rebounded modestly Tuesday from Monday's declines. Tesla advanced early before dropping more than 1%.
Oil Stocks Take Back Ground Amid China Covid Shift
Energy giant Exxon Mobil added 0.66% while Chevron jumped 1.5%.
Along with XOM and CVX, oil stocks Apache, Marathon Petroleum and Devon Energy all gained more than 1%.
Oil field service firms Halliburton, Schlumberger and Baker Hughes also all rallied.
U.S. oil prices felt some added pressure on Monday after the White House on Saturday eased oil sanctions on Venezuela. The Biden administration, following a human rights agreement signed between President Nicolaus Maduro's administration and opposition negotiators, said it would allow Chevron to resume oil production in the Latin American nation. Chevron is permitted to pump crude for six months and can only export it to the U.S. under the license agreement.
China Stocks Rally — Again
U.S. based Casino stocks extended their rally Tuesday, after Monday's news that the Chinese government granted provisional licenses to operate in Macau. Wynn Resorts shot up 2.7%. Las Vegas Sands rallied 2.3%. Melco Resorts & Entertainment jumped 9.8%.
MGM Resorts International, which has less exposure to Macau than its competitors, added 2.5%, after falling 2.3% Monday.
The KraneShares CSI China Internet ETF jumped 5.8% Tuesday, as Pinduoduo leapt 5.9%. Alibaba rose 5.2%. Baidu popped 5.3%.
OPEC+ And Russian Crude
Meanwhile, as uncertainty around China's economy continues, oil stocks and prices are also responding to expectations for the Organization of Petroleum Exporting Countries as it prepares to meet on Dec. 4 to make decisions on oil production. Whether or not OPEC and partner countries including Russia will tighten or losses supplies, after cutting production by 2 million barrels per day in November, remains the wildcard question.
News reports said the cartel was considering a 500,ooo barrel per day increase, which OPEC sources strongly denied. Analysts quoted by Bloomberg anticipate further cuts, by as much as two million barrels per day.
In addition, the oil cartel meets before the European Union is set to impose an embargo on oil from Russia. The G-7 is also attempting to implement a price cap on Russian crude sales by Dec. 5, as the EU and the U.S. look to ratchet up sanctions on Russia in response to the war in Ukraine.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
