Crude Oil gained as a series of challenges to supply eclipsed concern about the lingering threat to energy demand from lockdowns in China. With Brent for June settlement rising by 0.9% to $107.75 a barrel on the ICE Futures Europe exchange.
West Texas Intermediate for June delivery added 0.8% to $103.01 a barrel on the New York Mercantile Exchange at 12:07 p.m. in Singapore.
As the Ukraine war grinds on, European Union members are moving to cut dependence on Russian oil, with German Foreign Minister Annalena Baerbock saying the country plans to stop imports by year-end. A glimmer of home for Africa oil producers who have the infrastructure to step in.
At the same time, Russian output has fallen, and protests in Libya hurt the nations supply ouput.
After Russia’s invasion of its smaller neighbour sent shockwaves across the global energy market, oil has rebounded by more than a third this year, reaching its highest level since 2008. Inflation has risen as a result of the fighting, and oil shipments have been rerouted. The United States and the United Kingdom have banned Russian oil, and the EU is under increasing pressure to do the same. Significant holdings from strategic reserves have also been released by Washington and its allies.
According to Gao Jian, an analyst at Zhaojin Futures Co, the risks in the oil market “lead to the downside.” “Macroeconomic concerns are mounting, and traders do not appear to accept Germany’s proposal to restrict Russian oil.” Furthermore, in May, a synchronised SPR release will begin to flow to market.”
Meanwhile, in China, officials are battling a wave of Covid-19 in major cities. Strict restrictions have hampered mobility, notably for the nation’s truck fleet, and banks are lowering their projections for the country’s expansion this year.
While economic fundamentals remain robust, President Xi Jinping told a local gathering that “we have yet to walk out of the shadow” of the epidemic.
While oil markets remain bullishly backwardated, with near-term prices outperforming longer-term prices, differentials have fluctuated significantly. On Thursday, Brent’s prompt spread, or the gap between its two closest futures, was 51 cents per barrel. On Monday, it was $1.22, and a month ago, it was $3.70.
According to statistics from the Energy Information Administration, US commercial stocks fell by roughly 8 million barrels last week. Since January 2021, that was the greatest drop in holdings.