Demand expected to rise as lockdown eases in China
EU continues negotiations on embargo on Russian crude oil
▲ A pumping jack is pulling oil from an oil field near Lovington, New Mexico, USA. Lovington/AP News
International oil prices rose on news of the European Union’s (EU) embargo on Russian oil and the easing of lockdowns in China.
On the New York Mercantile Exchange (NYMEX) on the 20th (local time), the US West Texas Intermediate (WTI) crude for June contract closed at $113.23 per barrel, up $1.02 (0.91%) from the previous trading day. On the London ICE Futures Exchange, Brent crude for July contract rose by $0.75 (2.67%) to $112.79 per barrel.
WTI has been rising for the fourth straight week since mid-February. Brent crude rose 1% this week after falling about 1% last week.
As China begins easing lockdowns to alleviate the novel coronavirus infection (COVID-19), expectations are rising that oil demand will rise. China is the world’s largest oil importer, and demand is expected to recover quickly once the lockdown is lifted and the economy resumes.
Although a new coronavirus infection (COVID-19) infection was discovered outside of the quarantine zone in Shanghai, China for the first time in five days, the Shanghai city authorities are expected to proceed with normalization on June 1 as planned.
The EU is also working to reach a deal with Hungary, which opposes the embargo on Russian oil. According to a study by consulting firm BCA cited by CNBC, the EU is more likely to declare an embargo after Germany said it could cut Russian oil imports by more than half in a very short period of time.
US energy companies are ramping up production. It has been adding oil and natural gas drilling for the ninth straight week, but pressure from the US government appears to have had an effect, CNBC said.
US gasoline prices are at an all-time high.
Concerns about an economic slowdown are a factor that restrains oil demand, but supply is still short of demand.
Ole Hansen, head of commodities strategy at Saxo Bank, told Marketwatch, “Oil prices are staying in the boxed range amid concerns that the economy will slow down due to central bank tightening and concerns about global fuel supply shortages.”
India, the world’s third-largest oil importer, recorded its highest crude oil imports in April in three and a half years. India is said to have increased its imports of Russian oil to avoid soaring oil prices.
