Oil steadies as traders assess China’s vow, disruption in Libya

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Oil steadies as traders assess China’s vow, disruption in Libya

10:15 CAT | 19 Apr 2022

Image: Qilai Shen/Bloomberg

Brent for June settlement rose 0.1% to $113.30 a barrel on the ICE Futures Europe exchange at 6:28 a.m. in London.

Oil steadied as China vowed to repair the economic damage caused by a spate of lockdowns to combat the spread of Covid-19, and crude supplies from Libya were disrupted.

Global benchmark Brent was little changed near $113 a barrel after a four-day winning run. The impact of the pandemic on China’s economy is short term and normal conditions will be “rapidly restored” after the outbreak is contained, a spokesperson for the top economic planner said on Tuesday, a day after the central bank moved to aid individuals and small businesses.

Libya’s oil production has fallen by more than half a million barrels a day and there’s a risk of further losses as a wave of political demonstrations engulfs the OPEC member. The Sharara field in the west of the country, which can pump 300 000 barrels a day, has been closed as protests spread.

Oil has advanced more than 45% this year as Russia’s invasion of Ukraine upended an already-tight market. The crisis is rerouting global crude flows, with the US and UK moving to ban the import of Russian barrels, while some Asian buyers take extra cargoes. At the same time as the war drags on, there’s mounting pressure on the European Union to also curb its imports.

“The demand impact of China lockdowns and the outages in Libya are on the oil market radar,” said Vandana Hari, founder of Vanda Insights. “But the prospect of the EU phasing out Russian oil imports is the key sentiment driver.”

Prices:

Brent for June settlement rose 0.1% to $113.30 a barrel on the ICE Futures Europe exchange at 6:28 a.m. in London.

West Texas Intermediate for May delivery was 0.2% lower at $108.04 a barrel on the New York Mercantile Exchange.

As Covid-19 has flared in Asia’s top economy, Beijing has ordered severe lockdowns in urban centers including Shanghai, the commercial capital. That’s weighed on energy consumption as mobility sinks and industrial output slows.

Oil markets remain backwardated, a bullish pattern that’s marked by near-term prices trading higher than longer-dated ones. Brent’s prompt spread — the difference between its two nearest futures contracts — was $1.32 a barrel in backwardation, up from 42 cents a week ago.

This year’s jump in oil prices spurred US President Joe Biden to order the release of millions of barrels from emergency stockpiles. Following the move, a cargo of crude from the nation’s Strategic Petroleum Reserve departed a Texas port bound for Europe as some local refiners shun Russian supplies.

The recent gains in crude as well as other commodities are fanning inflation, prompting central banks to tighten policy. On Monday, Federal Reserve Bank of St. Louis President James Bullard said the US central bank shouldn’t rule out rate increases of 75 basis points.

Source: Bloomberg