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Oil settles up as supply risks outweigh economic worries

Published 20/05/2022, 01:41
© Reuters. FILE PHOTO: Pump jacks operate at sunset in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford
CHNA
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By Scott DiSavino

NEW YORK (Reuters) -Oil prices settled slightly higher on Friday as a planned European Union ban on Russian oil and easing of COVID-19 lockdowns in China countered concerns that slowing economic growth will hurt demand.

Brent futures for July delivery rose 51 cents, or 0.5%, to $112.55 a barrel. U.S. West Texas Intermediate (WTI) crude for June rose $1.02, or 0.9%, to settle at $113.23 on its on its last day as the front-month.

WTI notched its fourth straight week of gains, which it last did in mid-February. Brent gained about 1% this week after falling about 1% last week.

The more actively-traded WTI contract for July was up about 0.4% to $110.28 a barrel.

"The risks remain tilted to the upside ... given the Chinese reopening and continued efforts towards a Russian oil embargo by the EU," said Craig Erlam, a senior market analyst at OANDA.

In China, Shanghai did not signal any change to its planned end of a prolonged city-wide lockdown on June 1 even though the city announced its first new COVID-19 cases outside quarantined areas in five days.

The energy market expects the lifting of some coronavirus restrictions in Shanghai to boost energy demand. China is the world's top crude importer.

The EU is hoping to clinch a deal on a proposed ban of Russian crude imports which includes carve-outs for member states most dependent on Russian oil, such as Hungary.

"Odds of an EU embargo being declared sooner rather than later increased in the wake of Germany's success in cutting Russian oil imports by more than half in a very short period," consultancy BCA research said in a note.

German big business is drafting a plan to use an auction system to help ration available supplies in the event Russia cuts off its gas, although some fear it could punish smaller firms.

In the United States, U.S. energy firms this week added oil and natural gas rigs for a ninth week in a row, according to the Baker Hughes rig count, as mostly small producers respond to high prices and prodding by the government to ramp up output.

The rig count is an indicator of future output growth.

Americans continued to get behind the wheel even though gasoline prices at the pump keep hitting record highs. Auto club AAA said national average regular unleaded gasoline prices hit a record $4.59 per gallon on Friday.

© Reuters. FILE PHOTO: Pump jacks operate at sunset in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford

In India, crude oil imports in April were the highest in 3-1/2 years as the world's third biggest oil importer and consumer ramped up discounted Russian oil purchases to fuel demand recovery and fight high prices.

In Norway, crude output in April missed official forecast by 10.6%, while its gas production was in line with expectations.

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