Oil prices rose for a fourth day on Friday as Russian supply disruption fears trumped COVID-19 lockdowns in China, the world’s biggest crude importer,that areweighing on demand.
Brent crude futures rose 88 cents, or 0.8%, to US$108.47 a barrel by 0639 GMT after gaining 2.1% in the previous session. The front-month June contract expires later on Friday. The more active July contract rose 97 cents to US$108.23 a barrel.
U.S. West Texas Intermediate crude gained 55 cents, or 0.5%, to US$105.91 a barrel after settling 3.3% higher on Thursday.
Both contracts are set to close the week higher and post their fifth straight monthly gains, buoyed by the increased likelihood that Germany will join other European Union member states in an embargo on Russian oil.
Still, oil prices have been volatile as China has shown no sign of easing lockdown measures despite the impact on its economy and global supply chains.
“With both full and partial lockdowns ramping up since March, China’s economic indicators have plunged further into the red. We now expect China’s GDP to slow further in Q2,” Wood Mackenzie’s Head of APAC Economics Yanting Zhou said in a note.
“Oil market volatility is set to continue, with the potential for more widespread and prolonged lockdowns into May and beyond, skewing the near-term risks for China’s oil demand – and prices – to the downside.”
On the supply side, OPEC+ is likely to stick to its existing deal and agree another small output increase for June when it meets on May 5, six sources from the producer group told Reuters on Thursday.
However, Russia’s oil production may fall by as much as 17% in 2022, an economy ministry document seen by Reuters showed on Wednesday, as Western sanctions imposed on Moscow over its invasion of Ukraine hurt investments and exports. Russia calls the invasion a “special military operation” to disarm Ukraine.
Sanctions have also made it increasingly difficult for Russian ships to send oil to customers, prompting Exxon Mobil Corp to declare force majeure for its Sakhalin-1 operations and curtail output.
Concerns about disruptions to Russian oil exports, especially diesel, have pushed Asian refiners’ margins to record levels.
Diesel futures on the New York Mercantile Exchange closed at a record high of US$5.14 per gallon on Thursday, while New York Harbor diesel traded at a record premium to futures prices on what traders are describing as a short squeeze against the May diesel contract.
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