Oil prices rose about 1% during trading today, Friday, for the fourth consecutive day, as fears of disruption of Russian supplies outweighed the closures in China, the largest importer of crude in the world, due to the outbreak of the Corona virus.
Yesterday, Thursday, oil prices ended more than 3% higher, after volatile trading, with investors warning about dwindling demand for fuel in China and the decline in distillate stocks in America to the lowest level since 2008.
Oil Prices Today
The price of benchmark Brent crude – for June delivery – increased by 1.22%, to record $108.80 a barrel.
The price of West Texas Intermediate crude – for delivery in June – also rose by 1.13%, recording 106.31 dollars per barrel.
Both contracts are set to close the week higher and post their fifth consecutive monthly gain, boosted by the increased likelihood of Germany joining other EU member states in a Russian oil embargo.
However, oil prices remained volatile, as China showed no sign of easing lockdown measures despite the impact on its economy and global supply chains.
Oil Demand
“With the escalation of full and partial lockdowns since March, Chinese economic indicators have fallen further into the red,” said Yanting Zhou, head of Asia Pacific economies at Wood Mackenzie.
He expected China’s gross domestic product to slow further in the second quarter.
He noted that oil market volatility is set to continue, with more widespread and prolonged shutdowns likely in May and beyond, skewing China’s oil demand risks on prices in the near term.
OPEC+ Meeting
On supplies, OPEC+ is likely to stick to its current agreement, another slight increase in production for June, when it meets on May 5.
An Economy Ministry document showed that Russia’s oil production could fall by as much as 17 % in 2022, as Western sanctions imposed on Moscow over its invasion of Ukraine hit investments and exports.
Sanctions have also made it increasingly difficult for Russian ships to send oil to customers, prompting US ExxonMobil to declare force majeure on its Sakhalin-1 operations and cut production.
Russian Oil Exports
Concerns about disruption to Russian oil exports, especially diesel, have also pushed the margins of Asian refineries to record levels.
Diesel futures on the New York Mercantile Exchange closed at a record high of $5.14 a gallon Thursday, while New York Harbor diesel futures traded at a record premium to futures prices on what traders describe as short pressure against the May diesel contract.
US Stocks
The US Energy Information Administration said, in its weekly report, that oil inventories in the United States rose by 0.7 million barrels, last week, which came slightly higher than analysts’ expectations.
While distillate stocks, which include diesel and jet fuel, fell to the lowest level since May 2008.
On the other hand, the weekly report on drilling activity in the US will be released from Baker Hughes on Friday.
Balance Between Demand And Supply
China’s Sinopec – the largest oil refiner in Asia – expects China’s demand for refined oil products to recover in the second quarter of this year; As the epidemic is being controlled in the country gradually
China – the world’s largest oil importer – is witnessing multiple closures, especially in the capital, Beijing; Due to the Corona epidemic, with increased procedures for mass testing for the epidemic in efforts to avoid a greater closure.
Concerns about oil demand are likely to intensify as global economic growth slows; Because of the rise in commodity prices and the escalation of the conflict between Russia and Ukraine.
The International Monetary Fund, in its latest report, lowered its estimates of global GDP growth to 3.6% during both the current and next year.
While US data showed today, the US economy contracted by 1.4% in the first quarter of this year, contrary to analysts’ expectations with supply chain disruptions and accelerating inflation.
In this regard, the director of the energy consultancy, Ajay Kedia, says that investors are trying to balance supply and demand concerns amid the turmoil in the Russian oil and gas sector and the outlook for the deteriorating global economy.
Source: XglobalMarkets
