MELBOURNE- Oil prices rose in early trade on Monday with US fuel demand, tight supply and a slightly weaker US dollar supporting the market, as Shanghai prepares to reopen after a two-month lockdown fuelled worries about a sharp slowdown in growth.
Brent crude futures rose 82 cents to $113.37 a barrel, while US West Texas Intermediate (WTI) crude futures climbed 69 cents, or 0.6 percent, to $110.97 a barrel, adding to last week’s small gains for both contracts.
“Oil prices are supported as gasoline markets remain tight amid solid demand heading into the peak US driving season,” said SPI Asset Management managing partner Stephen Innes.
“Refineries are typically in ramp-up mode to feed US drivers’ unquenching thirst at the pump.”
The US peak driving season traditionally begins on Memorial Day weekend at the end of May and ends on Labour Day in September.
Analysts said despite fears about soaring fuel prices potentially denting demand, mobility data from TomTom and Google had climbed in recent weeks, showing more people were on the roads in places like the United States.
“High frequency data suggests demand continues to grow,” ANZ analysts said in a note.
A weaker US dollar also sent oil higher on Monday, as that makes crude cheaper for buyers holding other currencies.
Market gains have been capped, however, by concerns about China’s efforts to crush COVID with lockdowns, even with Shanghai due to reopen on June 1.
Lockdowns in China, the world’s top oil importer, have hammered industrial output and construction, prompting moves to prop up the economy, including a bigger-than-expected mortgage rate cut last Friday.
The European Union’s inability to reach a final agreement on banning Russian oil for its invasion of Ukraine, which Moscow calls a “special operation”, has also stopped oil prices from climbing much higher.
German Economy Minister Robert Habeck is disappointed that the EU has not yet agreed to an oil embargo targeting Russia, he said in a radio interview, adding that Germany would be willing to forego Hungary’s participation to speed up the proposed ban.
“If the Commission president says we’re doing this as 26 without Hungary, then that is a path that I would always support,” Habeck told the Deutschlandfunk broadcaster ahead of talks with political and industrial leaders at the World Economic Forum in Davos.
“But I have not yet heard this from the EU,” he added.
Among the 27 EU member states, Hungary is the most vocal critic of the planned embargo on Russian oil.
Meanwhile, Iraq’s federal government aims to establish a new oil company in the Kurdistan region, the oil ministry said on Saturday.
The aim of the new company will be to enter into new service contracts with oil firms currently operating there under the Kurdistan Regional Government (KRG), according to a statement.
