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Picture: 123RF/IONUTANSICA
Picture: 123RF/IONUTANSICA

Singapore — Oil prices were mixed on Friday as China’s Covid-19 lockdowns weighed on the outlook for crude demand, though supply disruption fears as Western sanctions curb crude and products exports from Russia underpinned prices.

Brent crude futures rose 15c to $107.74 a barrel at 4.10am GMT after gaining 2.1% in the previous session. The front-month June contract expires later on Friday. The more active July contract rose 26c to $107.52 a barrel.

US West Texas Intermediate crude dipped 3c to $105.33 a barrel after settling 3.3% higher on Thursday.

Both contracts are set to close the week higher, with WTI on track to post five straight months of gains, buoyed by the increased likelihood that Germany will join other EU member states in an embargo on Russian oil.

Still, oil prices have been volatile as Beijing has shown no sign of easing lockdown measures despite the impact on its economy and global supply chains.

“With both full and partial lockdowns ramping up since March, China’s economic indicators have plunged further into the red. We now expect China’s GDP to slow further in Q2,” Wood Mackenzie’s head of APAC Economics Yanting Zhou said in a note.

“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.”

On the supply side, Opec+ is likely to stick to its existing deal and agree another small output increase for June when it meets on May 5, six sources from the producer group told Reuters on Thursday.

However, Russia’s oil production may fall by as much as 17% in 2022, an economy ministry document seen by Reuters showed on Wednesday, as Western sanctions imposed on Moscow over its invasion of Ukraine hurt investments and exports. Russia calls it a “special military operation” to disarm Ukraine.

Sanctions have also made it increasingly difficult for Russian ships to send oil to customers, prompting ExxonMobil to declare force majeure for its Sakhalin-1 operations and curtail output.

Concerns about disruptions of Russian oil exports, especially diesel, have pushed Asian refiners’ margins to record levels.

Diesel futures closed at a record high of $5.14 per gallon on Thursday while New York Harbor diesel traded at a record premium to futures prices on what traders are describing as a short squeeze against the May diesel contract.

Reuters

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