Oil Down as Renewed China COVID Curbs over New Outbreaks Temper Fuel Demand
2022.07.12 08:05
Budrigannews.com– Oil was down on Tuesday morning in Asia as demand concerns spurred as China discovered highly cases of infectious BA.5 omicron sub-variant.
Brent oil futures retreated 1.56% to $105.43 by 12:44 AM ET (4:44 AM GMT) and crude oil WTI futures fell 1.67% to $102.34 .
“Growing fears of a recession and continued sluggish demand in China is pulling oil prices lower, though the current supply-demand balances remain precarious,” Eurasia Group analysts said in a note.
Several Chinese cities are adopting fresh COVID-19 curbs to rein in new infections as the country has detected highly infections BA.5 subvariant cases.
“While China may take a more targeted approach in trying to squash any outbreak, we will need to see how this plays out given the country’s COVID zero policy,” ING head of commodity research Warren Patterson told Reuters.
“Overall, demand concerns are still driving price action. However, fundamentals are constructive, given the tight supply situation which is set to continue for at least the remainder of the year. As a result, we expect the downside in prices will be limited.”
On the supply side, Western sanctions on Russia over its invasion of Ukraine have disrupted crude and fuel supply. There have been curtailments of energy supply routes from Russia which concerns traders and utilities.
Worries of a disruption at the Caspian Pipeline Consortium’s system (CPC) eased after a Russian court overturned the ruling earlier suspending operations at the pipeline for 30 days. The pipeline carries oil from Kazakhstan to the Black Sea, accounting for around 1% of the global crude supply.
Most of the producers of the Organization of the Petroleum Exporting Countries (OPEC) are pumping at maximum capacity and are running low on their spare capacity. However, U.S. President Joe Biden will make the case for greater oil production from OPEC when he meets Gulf leader in Saudi Arabia this week, White House national security adviser Jake Sullivan said on Monday.
“Saudi Arabia is not expected to add significant volumes in the near term, despite President Joe Biden’s impending visit, as Riyadh will prioritize its commitment to market management and keeping spare capacity for emergency losses,” the Eurasia analysts said.
Investors now await U.S. crude supply data from the American Petroleum Institute, due later in the day.
