Oil holds firm near 13-week highs, but new lockdowns cap gains

Singapore — Oil prices held firm near 13-week highs on Thursday after China reported stronger-than-expected exports in May, though new Shanghai lockdown restrictions capped gains.

Brent crude futures for August rose 35c, or 0.3%, to $123.93 a barrel at 4.04am GMT, while US West Texas Intermediate (WTI) crude for July was at $122.35 a barrel, up 24c, or 0.2%.

Both benchmarks closed Wednesday at their highest since March 8, matching levels seen in 2008.

China’s exports jumped 16.9% from a year earlier as easing Covid curbs allowed some factories to restart, the fastest growth since January this year, and more than double analysts’ expectations for a 8.0% rise. Exports were up 3.9% in April.

However, parts of Shanghai began imposing new lockdown restrictions on Thursday, with residents of sprawling Minhang district ordered to stay home for two days in a bid to control Covid-19 transmission risks.

“The export performance is impressive in the context of the country’s multi-city lockdowns in the month,” Stephen Innes, managing partner at SPI Asset Management, said in a note Thursday.

“Still, the apparent negative feedback loop is there is less incentive for the authorities to move away from ‘zero Covid’ soon,” Innes said, adding that this was a bit of a saw-off for oil markets.

Meanwhile, peak summer petrol demand in the US continued to provide a floor to prices.

The US posted a record fall in strategic crude reserves even as commercial stocks rose last week, data from the Energy Information Administration (EIA) showed on Wednesday.

US petrol stocks unexpectedly dropped, indicating resilience in demand for the motor fuel during peak summer despite sky-high pump prices.

“It’s hard to see significant downside in the coming months, with the [petrol] market likely to only tighten further as we move deeper into driving season,” said ING’s head of commodities research, Warren Patterson.

EIA’s data showed that apparent demand for all oil products in the US rose to 19.5-million barrels a day while petrol demand rose to 8.98-million barrels a day, ANZ analysts said in a note.

Efforts by Opec+ oil producers to boost output are “not encouraging”, UAE energy minister Suhail al-Mazrouei said on Wednesday, noting the group was 2.6-million barrels a day short of its target.

Reuters