© Reuters. FILE PHOTO: Storage tanks are seen at the Petroineos Ineos petrol refinery in Lavera, France, March 29, 2022. REUTERS/Benoit Tessier
By Arathy Somasekhar
HOUSTON -Oil prices rebounded in volatile trading on Tuesday as the market weighed China’s plans to support its economy against lockdowns in the country’s capital city.
futures were up $2.37, or 2.3%, at $104.71 a barrel by 11:50 am ET (15:51 GMT). US West Texas Intermediate contracts were up $2.65, or 2.7%, at $101.21.
Brent and WTI had settled down about 4% on Monday and touched respective lows on Tuesday of $101.08 and $97.06 a barrel, pressured by concerns over demand in China, the world’s largest crude oil importer.
China’s central bank on Tuesday said it will step up prudent monetary policy support to the nation’s economy and any stimulus would help boost oil demand amid worries of a slowdown in global growth.
“Oil traders are putting Beijing lockdown fears in the rearview mirror and instead are focusing on more stimulus coming from China,” said Phil Flynn, an analyst at Price Futures Group.
The Chinese capital of Beijing has expanded its COVID-19 mass testing to much of the city of nearly 22 million as the population braces for a lockdown similar to Shanghai’s stringent curbs.
Adding to supply woes, the European Union continued to consider options to cut imports of Russian oil as part of possible further sanctions against Moscow over its invasion of Ukraine, but nothing has been formally proposed as governments assess their impact.
Germany said it hopes to replace all deliveries of oil from Russia in a matter of days, Economy Minister Robert Habeck said on Tuesday.
Global commodities trader Trafigura Group will stop all purchases of crude oil from Russia’s state oil company Rosneft by May 15, a company spokesperson said on Tuesday.
Still, analysts said the release of oil from emergency reserves has eased concerns over tight supply.
Kazakhstan has ramped up crude production over the past few days, sources familiar with the data told Reuters, after having to curtail it due to a bottleneck on its major exports pipeline.
The Caspian Pipeline Consortium pipeline and Black Sea terminal, which ship about 80% of Kazakh crude exports, returned to full capacity on Saturday after working at half capacity for several weeks due to storm-damaged mooring points.
In a bearish signal for oil markets, five analysts polled by Reuters estimated on average that inventories had increased by 2.2 million barrels in the week to April 22.
The poll was conducted ahead of the release of the inventory report from the American Petroleum Institute at 4:30 pm EDT (2030 GMT) on Tuesday. The official government Energy Information Administration data is due out on Wednesday.
“Focus has shifted toward the demand side of the equation and worries about prolonged supply disruptions have greatly been mitigated by the release of 240 million bbls of SPR oil by IEA members and by the ostensible, albeit somewhat obscured, dealing in Russian oil,” said Tamas Varga of oil broker PVM.
Valero Energy Corp (NYSE:), the first US refiner to report earnings for the quarter, said it expects product demand to remain healthy.