Oil prices rise with China’s fuel demand picking up
Singapore — Oil prices rose on Tuesday on an expected demand recovery in China as the world’s second-biggest economy relaxes tough Covid-19 curbs, and on doubts that a higher output target by Opec producers will ease tight supply.
Brent crude futures were up 76c, or 0.6%, at $120.27 barrel at 4.13am GMT.
US West Texas Intermediate (WTI) crude futures were up 83c, or 0.7%, at $119.33 a barrel. The benchmark hit a three-month high of $120.99 on Monday.
Beijing and commercial hub Shanghai have been returning to normal in recent days after two months of tight lockdowns to stem outbreaks of the Omicron variant. Traffic bans were lifted and restaurants were opened for dine-in service on Monday in most parts of Beijing.
“We could see a surge in fuel demand with cars back on roads in the major cities, and ports gradually returning to normal operation in China,” said Tina Teng, an analyst at CMC Markets.
Top oil exporter Saudi Arabia raised the July official selling price for its flagship Arab light crude to Asia by $2.10 from June to a $6.50 premium over Oman/Dubai quotes, just off a peak recorded in May when prices hit highs due to worries of disruptions in Russian supplies.
Last week oil cartel Opec and its allies, together known as Opec+, decided to boost output for July and August by 648,000 barrels a day, or 50% more than previously planned.
The increased target was spread across all Opec+ members. However, many members have little room to ramp up output, including Russia, which faces Western sanctions.
“While the new increased monthly targets continue to be driven by proportional contributions from all participants (including Russia), it is unrealistic to expect an increase close to the headline figure,” said Stephen Innes, managing partner at SPI Asset Management, in a note.
Elsewhere, US crude inventories were likely to have fallen last week, while petrol and distillate stockpiles were seen up, a preliminary Reuters poll showed.
Reuters