Oil held gains above $105 a barrel as investors weighed higher demand for refined products against a slew of lockdowns in major cities in China.
West Texas Intermediate futures were little changed in early Asian trade after closing 0.5% higher on Monday. Record fuel exports from the U.S. Gulf Coast are draining local supplies, pushing diesel margins to a fresh high. The tightness reflects higher global demand for fuels, especially from Latin America, as supply remains low on the shunning of Russian cargoes.
Oil has been grappling with a tumultuous period of trading since Russia’s invasion of Ukraine in late February. Prices on Monday initially retreated as Beijing and Shanghai implemented stringent measures to contain a widespread Covid-19 outbreak, stoking concerns over demand. In Europe, a ban on Russian imports is set to be proposed by the European Union by the end of the year.
WTI for June delivery added 22 cents to $105.39 a barrel on the New York Mercantile Exchange at 9:36 a.m. in Singapore.
Brent for July settlement rose 0.1% to $107.71 a barrel on the ICE Futures Europe exchange, after closing 0.4% higher on Monday.
“Oil is currently being buoyed by record fuel shipments from the U.S., but it’s most likely be a temporary factor,” Will Sungchil Yun, a senior commodities analyst at VI Investment Corp. in Seoul, said by phone. “The market will continue to be rattled by the prospects of a ban on Russian imports and China’s Covid Zero strategy, which will have a more lasting impact on the prices.”
Crude climbed for a fifth month in April, marking the longest monthly winning streak since January 2018. Still, concerns over an economic slowdown, persistently high inflation and an increasingly aggressive tightening rhetoric by Federal Reserve officials have continued to rattle the market, leaving prices vulnerable to big swings.
Brent remains in backwardation, a bullish structure where near-dated contracts are more expensive than later-dated ones. The benchmark’s prompt timespread closed at $1.56 a barrel in backwardation on Monday, compared with a high of $3.88 on March 8.