How are China’s COVID And Economic Fear Affecting Oil Prices?
Oil prices gained $1 in choppy trade on Tuesday as tight global supply overshadowed concerns that China’s potential recession and new COVID-19 regulations would hurt demand.
At 0634 GMT, WTI crude in the United States was up 96 cents, or 0.8 percent, to $121.89 a barrel; meanwhile, Brent crude futures were up $1.05, or 0.9 percent, to $123.32 a barrel. A decline in exports from Libya has exacerbated global supply constraints because of a political crisis that has impacted output and ports. At the same time, other OPEC+ members struggle to reach their production limits; moreover, Russia faces oil export prohibitions because of the Ukraine conflict. According to Libya’s oil minister, Mohamed Aoun the output dropped to 100,000 barrels per day from 1.2 million last year.
Oil Price Anticipations
Jeffrey Halley, a senior market analyst at OANDA, explained that the continued worldwide pressure on refined goods, combined with a lack of investment to bring new supply online from OPEC members or other sources, means lost Russian output is nowhere near being compensated by global markets. The market will be looking for weekly inventory data from the American Petroleum Institute on Tuesday; and, they’ll be looking at the United States Energy Information Administration on Wednesday to see how tight the crude and gasoline supply remains. Six experts surveyed anticipate crude stocks in the United States to fall by 1.2 million barrels in the week ending June 3; meanwhile, gasoline inventories should rise by roughly 800,000 barrels; furthermore, distillate inventories, which include diesel and heating oil, should remain steady.
On the demand side, China’s newest COVID epidemic(connected to a Beijing bar) sparked worries of a fresh round of lockdowns; just as the country loosened its restrictions. On Monday, Chaoyang, China’s most populated district, began a three-day mass testing blitz among its nearly 3.5 million people. The government identified the bar clientele; currently, their apartment buildings are under lockdown.