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Oil prices rise as tight supply thwarts Chinese COVID and recession worries

Oil prices rose around $1 in volatile trading on Tuesday as tight global supply outweighed fears that fuel demand could be hit by a possible recession and further COVID-19 restrictions. in China.

U.S. West Texas Intermediate (WTI) crude rose 96 cents, or 0.8%, to $121.89 a barrel at 0634 GMT, while Brent futures rose $1.05, or 0.9%, to 123.32 dollars a barrel.

Read also | Oil falls on Beijing’s COVID-19 warning and inflation worries

The tight global supply has been compounded by a drop in exports from Libya amid a political crisis that has hit production and ports, while other OPEC+ producers struggle to meet their production quotas and that Russia is facing bans on its oil because of the war in Ukraine.

Analysts at ANZ Research quoted Libyan Oil Minister Mohamed Aoun as saying production in the country had fallen to 100,000 barrels per day from 1.2 million bpd last year.

“Continued pressure on refined products globally, along with a lack of investment to bring more supplies online from OPEC members or other sources, means lost Russian production is far from being covered by global markets,” said senior market analyst Jeffrey Halley. to OANDA, in a note.

Watch | Saudi Arabia raises official oil price

The market will wait for weekly U.S. inventory data from the American Petroleum Institute on Tuesday and the U.S. Energy Information Administration on Wednesday to get a sense of how tight crude and fuel supplies are.

Six analysts expect U.S. crude inventories to have fallen by 1.2 million barrels in the week to June 3, while forecasting gasoline inventories to have risen by around 800,000 barrels and that distillate inventories, which include diesel and fuel oil, remained unchanged.

On the demand side, China’s latest COVID-19 outbreak, linked to a Beijing bar, raised fears of a new phase of lockdown even as restrictions in the country eased and demand for fuel was expected to firm up. .

Read also | Asian stocks fall as oil persists above $120 and the yen tumbles

The Chinese capital’s most populous district, Chaoyang, on Monday launched a three-day mass testing campaign among its roughly 3.5 million residents.

Around 10,000 close contacts of bar patrons have been identified and their residential buildings locked down.

Going forward, oil prices could come under pressure if the U.S. Federal Reserve surprises markets with a higher-than-expected interest rate hike, said CMC Markets analyst Tina Teng.

“Otherwise, traders will again focus on China’s COVID restrictions, when we could see prices retrace the outlook for demand from the world’s second-largest economy,” she added.

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Post expires at 9:16am on Friday June 24th, 2022