Oil mixed as China lockdowns raise demand questions

Tokyo — Oil prices were mixed on Friday as strong import data from China, the world’s biggest crude importer, that boosted sentiment earlier ran into concerns about Chinese cities in lockdown due to coronavirus outbreaks.

Brent was down 3c to $56.69 at 1.33am GMT, after gaining 0.6% on Thursday. US West Texas Intermediate crude was up 12c at $53.69 a barrel, having risen more than 1% the previous session.

While producers are facing unparalleled challenges balancing supply and demand equations with calculus involving vaccine rollouts vs lockdowns, financial contracts have been boosted by strong equities and a weaker dollar, which makes oil cheaper, along with strong Chinese demand.

“Oil market euphoria is unequivocally strong, but market indicators from Asia are mixed,” RBC Capital Markets said.

“China, the global engine of oil demand growth, is wrestling with fresh Covid outbreaks,” it said.

Crude imports into China were up 7.3% in 2020, with record arrivals in two out of four quarters as refineries increased runs and low prices prompted stockpiling, customs data showed on Thursday.

But China reported the highest number of daily Covid-19 cases in more than 10 months on Friday, capping a week that has resulted in more than 28-million people under lockdown and the country’s first death from the coronavirus in eight months.

Across the wider Asian region, “refining margins remain abysmal and regional floating storage is higher than month-ago levels,” RBC said.

Raising prospects of increased oil demand from the world’s biggest crude consumer was a nearly $2-trillion Covid-19 relief package in the US unveiled by president-elect Joe Biden.

Reuters