Oil staged a partial recovery, after dropping 4% on Monday, as traders weighed China’s demand outlook following the easing of some virus restrictions in the financial hub of Shanghai.
West Texas Intermediate futures rose more than 2% to trade above $96 a barrel. Shanghai has eased lockdowns for some housing complexes, but most people remained confined to their homes and authorities have indicated they will reimpose restrictions if virus cases climb. Oil has now given up almost all its gains since Russia’s invasion of Ukraine in late February.
“What we’re seeing now is looking like a short-lived rally,” said Will Sungchil Yun, a senior commodities analyst at VI Investment Corp. in Seoul. “Investors are still concerned about the negative impact the virus flare-up will have on the nation’s growth and demand.”
The oil market has seen a tumultuous period of trading since late February, whipsawed by Russia’s invasion of its neighbour, rising tensions in the Middle East, the virus flare-up in China and tighter US monetary policy. The war in Ukraine has entered its second month despite efforts to agree a cease-fire.
The invasion has fanned inflation and prompted the US and its allies to release strategic reserves to tame rising energy prices.
OPEC’s top diplomat, meanwhile, told European Union officials that the current crisis in global oil markets caused by Russia’s war is beyond the group’s control.
Brent remains in a bullish backwardation structure — where near-dated contracts are more expensive than later-dated ones — but it has sharply eased over the past week.
The prompt timespread for the global benchmark was 16 cents a barrel in backwardation, compared with $1.53 at the start of last week.
