Oil prices entangled between China’s lockdown & EU’s Russian oil ban

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Oil prices entangled between China’s lockdown & EU’s Russian oil ban

Crude oil
Image source: © Lancemichaels | Megapixl.com

Highlights

  • Crude oil prices rose on Wednesday.
  • The American Petroleum Institute showed that crude stocks fell by 3.5 million barrels for the week ended 29 April.
  • China's calm demand is a real concern, investors are wondering whether it will pick up in 2022 or not.

Crude oil prices tumbled by more than 2% on Tuesday due to lower energy demand in China amid prolonged COVID-19 related lockdowns. However, the oil prices rose at the start of Asian trade on Wednesday following the release of industry data showing drawdowns in U.S. crude and fuel stockpiles, raising supply concerns.

During the start of the week, crude oil prices tumbled after China published its factory activity data on Saturday stating that the country’s economy contracted for a second month to its lowest since February 2020 because of COVID-19 lockdowns.

Talking about last week, the prices of both crude oil benchmarks rose more than 3% as China’s central bank said that it will pump the country's monetary policy to support the economy which would ultimately boost oil demand.

Also Read: Crude oil surges to 14-year highs on delays in Iranian talks

On Tuesday, Brent Crude oil settled at US$104.97/bbl, down 2.4%, and WTI crude oil settled at US$102.41/bbl, down 2.6%.

Source: Refinitiv Eikon

On Wednesday, July delivery Brent Crude oil futures gained and last traded at US$105.84 per barrel up 0.83%, while June delivery WTI crude oil futures exchanged hands at US$103.36 per barrel, down 0.93% at 12:20 AM AEST.

The play between China’s rising coronavirus cases and lower stockpiles

Today’s gain in crude oil prices came after the news that the European Union is drafting a set of new sanctions against Russia for waging war on Ukraine, targeting Russia's oil industry.

Additionally, a report published by the American Petroleum Institute stated that crude stocks fell by 3.5 million barrels for the week ended 29 April. The falling crude stockpiles have raised future supply concerns among investors.

Moreover, Beijing reported dozens of new coronavirus cases daily in an outbreak that has entered its second week. The region is mass-testing residents to prevent a lockdown similar to Shanghai's over the past month.

Various venues including restaurants were closed in the city and streets were silent on Tuesday during a five-day Labour Day holiday.

China's calm demand is a real concern, investors are wondering whether it will pick up in 2022 or not.

The prices of both crude oil benchmarks have been on a wild rally but rising coronavirus cases in China have stalled the bull run amid dampen demand.

Also Read: Crude oil slides from multi-year highs as Iran talks rev up

Bottom Line

Crude oil prices gained on Wednesday after falling more than 2% on Tuesday. China’s prolonged lockdown dampened oil demand and weighted oil prices while the European Commission’s sixth set of sanctions to ban Russian fossil fuels has partially offset the losses.

Here’s how commodities performed in the last week click here

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