New Delhi : Crude oil prices gave up early gains on Thursday as demand concerns returned as officials in Shanghai, China began to impose new COVID-related restrictions, fueling concerns of a slump in demand.
The two-month-long lockdown in Shanghai last week supported oil prices in the past few sessions.
At 7.07 pm, the August contract for Brent futures on the Intercontinental Exchange was at $123.02, down 0.45% from the previous close. Oil futures, however, started the session in the green and Brent’s August contract touched a high of $124.34 a barrel.
West Texas Intermediate’s July contract fell 0.83% to $121.10 a barrel on the NYMEX.
A Kotak Securities report said, “NYMEX crude gave up early gains, while base metals slipped as new lockdown measures were announced in China, reigniting concerns of new sanctions and fears of a weak economic recovery. “
Analysts expect the European Central Bank (ECB) to end its long-running stimulus plan on Thursday, further weakening market sentiment. The ECB also indicated it would announce its first interest rate hike since 2011 next month, followed by a potentially bigger move in September if inflation does not calm down. The recent hike in interest rates globally has added to concerns of a slowdown in growth, which has weighed on demand expectations.
Moreover, according to Platts Analytics OPEC and its allies’ decision to increase output will address Asia’s crude oil supply concerns amid revived demand. “Asia is breathing a sigh of relief amid rising expectations that a sustained release from US strategic reserves, along with a supply boost by the OPEC-led alliance, will eventually address uncertainty over cargo availability and mismatch between global demand. will help to improve it. and supplies,” it said.
“The decision by OPEC+ to raise 648,000 b/d for July and another 648,000 b/d for August – almost 50% more than the most recent monthly increase – will be music to the ears of global refiners as they head to the Northern Hemisphere summer. driving season,” Platts Analytics said in a report.
Specifically for Asia, refiners would like to import more crude as demand is expected to increase by 2 million barrels per day in the third quarter compared to the second quarter, said Lim Jit Yang, Asia-Pacific oil markets advisor at Plates Analytics. Is.
“US SPR releases are also helping to ease the oil supply and demand balance, adding about 0.8 million-1 million b/d of supply in recent weeks,” he said.