Oil futures ticked higher early Tuesday, with underlying support tied to tight fuel supplies and prospects for a European Union ban on imports of Russian crude, though upside was seen capped by continued concerns that China’s zero-COVID policy may weaken energy demand and shaky stock markets may reflect slowing economic growth.
- West Texas Intermediate crude for July delivery CL.1, -0.06% CL00, -0.06% CLN22, -0.06% rose 56 cents, or 0.5%, to $ 110.86 a barrel on the New York Mercantile Exchange.
- July Brent crude BRN00, +0.26% BRNN22, +0.26%, the global benchmark was up 61 cents, or 0.6%, at $ 114.03 a barrel on ICE Futures Europe.
- Back on Nymex, June gasoline RBM22, +0.26% dropped 3.3% to $ 3.673 a gallon, while June heating oil HOM22, +0.44% gained 1.5% to $ 3.825 a gallon.
- June natural-gas futures NGM22, +0.54% were down 1.3% at $ 8.63 per million British thermal units.
Oil has found support on optimism around plans to unwind lengthy lockdowns in Shanghai, China’s largest city, but uncertainty lingers over crude demand from the world’s largest oil importer as Beijing increased quarantine efforts in an effort to halt a COVID-19 outbreak. Chinese Vice Premier Sun Chunlan called the situation in Beijing manageable but that containment efforts can’t ease, Reuters reported, citing Xinhua, the state news agency.
“The oil market remains caught between fears of recession and the consequences of the zero-COVID policy in China on the one hand, and tight supply, especially of oil products, coupled with the prospect of U.S. gasoline demand picking up during the summer driving season on the other,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.
Tight U.S. supplies of gasoline and diesel have sent prices for both to records, though gasoline futures were in retreat Tuesday. Demand for gasoline expected to increase as summer driving season kicks off with the Memorial Day weekend.
Investors continue to monitor efforts by the European Union to agree to a plan to phase out imports of Russian oil and other energy in response to demand by Hungary for increased EU support to help it transition to other sources.
Weakness in equity markets has been a drag on crude, with big selloffs killing appetite for other assets perceived as risky. U.S. stocks were set for a lower start after a Monday bounce.