Crude Oil Edges Lower on New Partial Lockdowns in Shanghai

  • Commodities News
Crude Oil Edges Lower on New Partial Lockdowns in Shanghai

By Peter Nurse -- Oil prices edged lower Thursday following the announcement of new mobility restrictions in Shanghai, but remain near three-month highs amid signs of economic recovery from the world’s second-largest economy.

By 9:20 AM ET (1320 GMT), U.S. crude futures traded 0.5% lower at $121.51 a barrel, retreating from Monday’s three-month high, while the Brent contract rose 0.3% to $123.18 a barrel.

U.S. Gasoline RBOB Futures were up 0.8% at $4.2541 a gallon.

Parts of Shanghai began imposing new lockdown restrictions on Thursday, raising fears of more demand destruction at the largest importer of crude in the world, coming just over a week after China’s commercial hub ended prolonged curbs to control COVID transmission risks.

That said, Chinese trade data for May pointed to an economic recovery at this important growth driver, with exports increasing 16.9% on the year while imports grew 4.1% year-on-year, the first gain in three months.

Additionally, China's crude oil imports rose nearly 12% in May, admittedly from a low base a year earlier, with the country importing 45.83 million tons last month, equivalent to 10.79 million barrels per day. That compares with 10.5 million barrels per day in April and to a 2021 average of 10.3 million barrels.

Meanwhile, strong demand in the United States, the world’s largest consumer of crude, continued to provide a floor to prices, as the summer driving season continues and drivers show resilience despite sky-high pump prices.

Official data from the U.S. Energy Information Administration , released on Wednesday, showed a build of just over 2 million barrels of crude last week, while U.S. gasoline stockpiles dropped by 812,000 barrels.

“This leaves U.S. gasoline inventories at a little over 218MMbbls, closer to levels we usually see at the end of driving season, not at the beginning,” said ING analysts, in a note. 

Elsewhere, natural gas prices soared in the U.K. and continental Europe earlier Thursday after a fire at an LNG export terminal in Texas threatened to cut off a vital supply channel for months.

The fire broke out on Wednesday at Freeport LNG's facility on Quintana Island near Houston, Texas. Although it was quickly brought under control, Bloomberg cited a company spokesperson as saying that shipments from the terminal could be disrupted for three months.

This comes with Europe increasingly turning to LNG as it tries to reduce its dependency on Russian gas.

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