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An oil tanker is loaded at Saudi Aramco’s Ras Tanura oil refinery and oil terminal in Saudi Arabia. REUTERS/AHMED JADALLAH
An oil tanker is loaded at Saudi Aramco’s Ras Tanura oil refinery and oil terminal in Saudi Arabia. REUTERS/AHMED JADALLAH

Melbourne — 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 fuelled worries about a sharp slowdown in growth.

Brent crude futures rose 72c to $113.27 a barrel at 6.08am, while US West Texas Intermediate (WTI) crude futures climbed 53c, or 0.48%, to $110.81 a barrel, adding to last week's small gains for both contracts.

“Oil prices are supported as [petrol] 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 Labour Day in September.

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

“Covid-19 lockdowns are a transitory drag on demand in China, though elsewhere demand is holding up well,” ANZ analysts said in a note.

“We expect industrial activity to pick up, as stimulus measures kick in,” ANZ added.

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

Reuters

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