Crude Oil Lower on Weak Chinese Data; EU Oil Ban Eyed
2022.05.16 16:31
By Peter Nurse
Investing.com — Oil prices weakened Monday on signs that COVID lockdowns were severely hitting demand from China, the largest importer of crude in the world but remain elevated as the European Union still looks set to agree to an import ban on Russian crude, further disrupting global supply.
By 8:55 AM ET (1255 GMT), U.S. crude futures traded 0.4% lower at $108.25 a barrel, while the Brent contract fell 0.4% to $111.14 a barrel.
U.S. Gasoline RBOB Futures were up 1.5% at $4.0160 a gallon.
Shanghai set out plans on Monday for the end of a COVID-19 lockdown that has lasted more than six weeks and for the return of more normal life from June 1. However, if they are lifted, and it’s estimated that 46 cities in China are under lockdowns, China’s zero-COVID policy creates uncertainty over future flare-ups.
Also, significant damage has already occurred, judging by the latest data. Chinese retail sales in April shrank over 11% from a year earlier, while factory production fell 2.9% year-on-year.
This slowdown was shown in the country’s oil market as China processed 11% less crude in April than a year earlier, according to data released earlier Monday, with daily throughput falling to the lowest since March 2020.
That said, oil prices are still up more than 40% this year, helped by supply concerns in the wake of Russia’s invasion of Ukraine and the associated sanctions placed on Moscow.
Germany said on Monday it’s willing to press ahead with an embargo on Russian oil imports even without unanimous support from the rest of the EU. The EU’s sixth sanctions package, which would end imports of Russian crude and refined products by the end of the year, has been held up by opposition from Hungary and other member states in central and eastern Europe.
“Germany is reported to have already reduced its dependence on Russian oil to around 12% of total demand currently compared to around 35% before the Russia-Ukraine war,” said analysts at ING, in a note. “And the country continues to seek alternative sources of crude to move away from Russian oil completely.”
On a corporate note, Saudi Aramco (TADAWUL:2222) posted record first quarter figures, with net profit soaring 82% to $39.5 billion, helped by the elevated crude prices, showing why the Saudi oil giant has displaced Apple (NASDAQ:AAPL) as the world’s most valuable company.
Additionally, Saudi Arabia is on track to lift oil production capacity by more than 1 million barrels per day to over 13 million b/d by the end of 2026 or start of 2027, the energy minister Prince Abdulaziz bin Salman said on Monday.
