The black liquid is bullish at the start of the London trading session on Friday but ongoing COVID-19 lockdowns have dampened fuel demand in China ahead of a long holiday. However, supply disruption fears as Western sanctions impact crude and product exports from Russia underpinned prices.
The global benchmark, the Brent oil futures is up 0.82%, currently trading$108.14 a barrel, after jumping 2.1% during the previous session while the United States benchmark, the West Texas Intermediate (WTI) futures is also up 0.52%, currently trading at $105.91, after settling 3.3% higher on Thursday.
Both Brent and WTI contracts are set to close the week and month higher, with the WTI on track to post five consecutive months of gains. The increased likelihood that Germany will join other European Union member states in an embargo on Russian oil also gave the black liquid a boost.
Oil prices have been volatile as COVID-19 lockdowns in China continue despite the negative impact on the economy and global supply chains.
On oil supplies, the Organization of Petroleum Exporting Countries and allies (OPEC+) is unlikely to tweak its existing supply deal too much.
Six OPEC+ sources told Reuters on Thursday, that the cartel will likely agree on another small output increase for June at its May 5 meeting.
According to Wednesday’s Ministry of Economic Development document seen by Reuters, it explains that Russia’s oil production could fall by as much as 17% in 2022.
Western sanctions imposed on Russia over its invasion of Ukraine on Feb. 24 have also impacted investments and exports.
Wood Mackenzie Head of APAC Economics Yanting Zhou said in a note that, “With both full and partial lockdowns ramping up since March 2022, China’s economic indicators have plunged further into the red. We now expect China’s GDP to slow further in the second quarter.”
He further stated, “Oil market volatility is set to continue, with the potential for more widespread and prolonged lockdowns into May and beyond, skewing the near-term risks for China’s oil demand, and prices, to the downside.”
The sanctions have also made it increasingly difficult for Russian ships to send oil to customers, with Exxon Mobil Corp recently declaring force majeure for its Sakhalin-1 operations and cutting output.
