Oil headed for its biggest weekly gain in almost two months as China softened virus controls, Washington mulled a pause in sales from strategic reserves, and a weaker dollar boosted the allure of commodities.

West Texas Intermediate held above USD 81 a barrel after a run of four daily gains. The uptick in prices comes ahead of a key meeting of the Organization Petroleum Exporting Countries and its allies at the weekend, and a last-minute drive by the European Union to agree on a price cap for Russian oil.

In the world’s largest oil importer, Beijing said it would allow some infected people to isolate at home, another softening of its Covid Zero policy. In addition, People’s Bank of China Governor Yi Gang said the central bank is now centered on economic growth, aiding the outlook for energy consumption.

Oil has staged a sharp rebound this week after hitting its lowest level since 2021 on Monday, with demand prospects improving due to the scaling back of China’s crippling Covid-Zero policy following protests. There have also been clear signs from Federal Reserve officials that the pace of interest-rate hikes will be slowed as a gauge of US consumer prices came in below estimates.

China is moving toward reopening “a bit quicker than we’ve expected following the unrest that we’ve seen,” said Neil Beveridge, senior oil analyst at Sanford C. Bernstein, on Bloomberg TV in Hong Kong. “If China gets going next year, that’s really going to turn things around.”

Reinforcing the brightening outlook were calls by the Biden administration to halt sales from the Strategic Petroleum Reserve and allow refilling of the country’s emergency stockpiles. On currency markets, a Bloomberg gauge of the dollar extended a retreat, another tailwind for crude.

OPEC+ will meet virtually this weekend to decide on supplies, and there are expectations members will hold output steady. Traders are also watching for further details on the Group of Seven-led price cap on Russian seaborne oil, with the EU closing in on a USD 60 a barrel cap before a Monday deadline.

That potential USD 60-a-barrel price limit “is still above the current levels that Russia is receiving for its crude,” said Warren Patterson, head of commodities strategy at ING Groep NV in Singapore. “If agreed at this level, it will have little impact on Russian oil revenues at the moment.”

Shipping costs for Russian crude are skyrocketing as more tanker owners shun the trade days before the stricter EU sanctions take effect. Owners who are still willing to load Russian crude are attempting to charge more for the risk.

EU closes in on USD 60 price cap for Russian oil as deadline looms