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An oil tanker is loaded at an oil refinery and oil terminal in Saudi Arabia. File photo: REUTERS/AHMED JADALLAH
An oil tanker is loaded at an oil refinery and oil terminal in Saudi Arabia. File photo: REUTERS/AHMED JADALLAH

London — Oil prices gained on Monday with US fuel demand, tight supply and a slightly weaker US dollar supporting the market, as Shanghai prepares to reopen after a two-month lockdown that fuelled worries about a sharp slowdown in growth.

Brent crude futures rose $1.12 or 1% to $113.67 a barrel at 9.12am GMT, while US West Texas Intermediate (WTI) crude futures climbed 96c, or 0.9%, to $111.24 a barrel, adding to last week’s small gains for both contracts.

“Oil prices are supported as gasoline markets remain tight amid solid demand heading into the peak US driving season,” said SPI Asset Management Managing Partner Stephen Innes.

“Refineries are typically in ramp-up mode to feed US drivers’ unquenching thirst at the pump.”

The US peak driving season traditionally begins on Memorial Day weekend at the end of May and ends on Labor Day in September.

Analysts said despite fears about soaring fuel prices potentially denting demand, mobility data from TomTom and Google had climbed in recent weeks, showing more people were on the roads in places like the US.

A weaker US dollar also sent oil higher on Monday, as that makes crude cheaper for buyers holding other currencies.

Market gains have been capped however by concerns about China’s efforts to crush Covid-19 with lockdowns, even with Shanghai due to reopen on June 1.

Lockdowns in China, the world’s top oil importer, have hammered industrial output and construction, prompting moves to prop up the economy, including a bigger-than-expected mortgage rate cut last Friday.

“The persistent squeeze in refined petroleum products in the US and ever-present Ukraine/Russia risk underpinned prices, with China slowdown and US recession noise limiting gains,” said Jeffrey Halley, a senior market analyst at Oanda.

The EU’s inability to reach a final agreement on banning Russian oil after its invasion of Ukraine, which Moscow calls a “special operation”, has also stopped oil prices from climbing much higher.

Reuters

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