Oil rises with China’s economic recovery buoying consumption

Oil rose in New York on optimism over China’s recovery from a virus-led demand crash and with the U.S. set to avoid a national lockdown to curb the spread of Covid-19.

China’s oil processing rebounded in October to match a record, as the world’s largest importer continues to lead the recovery in consumption. Indian fuel usage also posted a year-on-year increase in October, for the first time since February.

The robust recovery in Asia is supporting the oil market just as the U.S. and Europe face a downturn due to a resurgent virus. Brent’s nearest timespread—a gauge of market health—reached its strongest since mid-July on Monday, the latest sign that the recovery East of the Suez Canal is offsetting weakness in the West.

Oil capped its biggest weekly advance since early October on Friday after news of a breakthrough on a Covid-19 vaccine. Though Europe’s demand is wavering as lockdowns re-emerge, the U.S. said it will target local measures rather than a nationwide lockdown to tackle the spread of the virus. An OPEC+ committee will assess the health of the market on Tuesday, before a decision at the end of the month where a delay to an output hike is expected.

“The Brent curve structure continues to firm, global oil inventories continue to decline, a very promising vaccine is on the horizon” and OPEC+ will likely keep supporting the oil market, said Bjarne Schieldrop, chief commodities analyst at SEB AB.

China’s crude refining rose to 14.14 million barrels a day in October, matching a record set in June, as more plants processed oil to replenish inventories after a holiday demand boost. Meanwhile, total petroleum demand in India rose 2.7% last month—from a year earlier—the first annual increase since February.

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Though India’s fuel consumption was strong in October, it has pulled back slightly at the start of this month. Diesel sales were down 5.1% versus a year earlier, while gasoline was unchanged. There are still signs its crude purchasing is picking up though. Indian Oil Corp. has issued a raft of tenders to purchase West African oil in recent days, while its buying of Nigerian cargoes has gained, traders said.