Oil prices mixed as Beijing worries about lockdowns and tight supplies

© Reuters. FILE PHOTO: Tankers are seen at the wharf at the Sinopec Yaogang oil depot in Nantong city, Jiangsu province, China, June 11, 2019.Reuters/Stringer

Laura Sanikola

(Reuters) – Oil prices ended mixed on Thursday as supply concerns and geopolitical tensions in Europe prevailed on economic worries in financial markets at a time when inflation soared.

It fell 6 cents to settle at $107.45 a barrel. West Texas Intermediate crude gained 42 cents, or 0.4 percent, to settle at $106.13.

“The deal has been light and nobody knows what’s going to happen,” said John Kilduff, a partner at Again Capital LLC in New York.

An imminent oil ban from Russia, the EU’s main crude and fuel supplier, is expected to further tighten global supplies.

The EU is still haggling over the details of the Russian embargo, which needs unanimous support. However, the vote was delayed as Hungary opposed the ban because it was too damaging to its economy.

More broadly, oil prices and financial markets have been under pressure this week on rising interest rates, the strongest dollar in 20 years, inflation and a possible recession.

The prolonged COVID-19 lockdown in China, the world’s largest crude oil importer, also affected the market.

“The slump in demand growth comes at a time when China seems to be on the verge of locking down Beijing at any moment,” said Bob Yawger, head of energy futures at Mizuho.

The U.S. headline CPI rose 8.3 percent in the 12 months to April, adding to concerns about a larger rate hike and its impact on economic growth.

“Surge in oil prices and slowing economic growth are expected to significantly dampen demand recovery for the remainder of the year and into 2023,” the International Energy Agency (IEA) said in its monthly report on Thursday.

“The prolonged lockdown across China…is driving a sharp slowdown in the world’s second-largest oil consumer,” the agency added.

The Organization of the Petroleum Exporting Countries (OPEC) cut its forecast for world oil demand growth in 2022 for a second straight month, citing the impact of Russia’s invasion of Ukraine, rising inflation and a resurgence of the Omicron coronavirus variant in China.

Oil prices rose 5 percent on Wednesday after Russia sanctioned 31 companies in countries that imposed sanctions on Moscow following the Ukraine invasion.

This has caused jitters in the market, while Russia’s flow of funds to Europe through Ukraine has been reduced by a quarter. This is the first time exports through Ukraine have been disrupted since the invasion.

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