Oil rebounds on China’s plans to support its economy

Storage tanks are seen at the Petroineos Ineos oil refinery in Lavera, France, March 29, 2022. REUTERS/Benoit Tessier

HOUSTON, April 26 — Oil prices rebounded in volatile trading on Tuesday as the market weighed China’s plans to support its economy against a potential coronavirus lockdown in its capital Beijing.

Brent Crude futures settled $2.67, or 2.6%, at $104.99 a barrel, while US West Texas Intermediate contracts were up $3.16, or 3, 2%, to $101.70.

Brent and WTI had stabilized around 4% on Monday and touched respective lows of $101.08 and $97.06 a barrel on Tuesday, under pressure from concerns about demand in China, the largest importer of crude oil in the world.

NYMEX ultra-low sulfur diesel futures rose 9.2% to a record $4.47 a gallon after Poland said Russia had warned that the gas supply would stop on Wednesday.

China’s central bank said on Tuesday it would step up cautious monetary policy support for the country’s economy and any stimulus would help boost demand for oil amid concerns about slowing global growth.

“Oil traders are putting fears of Beijing’s lockdown in the rearview mirror and instead focusing on more stimulus from China,” said Price Futures Group analyst Phil Flynn.

China’s capital Beijing has expanded mass COVID-19 testing across much of the city of nearly 22 million as people brace for a lockdown similar to Shanghai’s tough restrictions. Read more

Weather-related production outages in North Dakota’s Bakken Shale Basin after snowstorm knocked out power and extreme product strength, with a focus on diesel prices, drive the market higher, said Scott Shelton, energy specialist at United ICAP.

Russian energy giant Gazprom (GAZP.MM) told Polish PGNiG (PGN.WA) that it will cut off gas supplies along the Yamal pipeline from Wednesday morning, PGNiG said in a statement. . Gazprom said on Tuesday that Poland is expected to start making payments under a new program from Tuesday. Read more

“Russia demanding payment in rubles from Poland will likely lead to a gas supply shutdown and also contribute to even higher diesel prices,” Shelton added.

Valero Energy Corp (VLO.N), the first U.S. refiner to report earnings for the quarter, said it expects product demand to remain healthy.

The European Union has continued to consider options to reduce Russian oil imports as part of possible new sanctions against Moscow following its invasion of Ukraine, but nothing has been formally offered.

Germany said it hoped to replace all oil deliveries from Russia within days, while commodities trader Trafigura Group said it would halt all crude oil purchases from the Russian oil company. Russian state Rosneft by May 15.

Still, analysts said the release of oil from emergency reserves eased concerns about tight supplies.

Kazakhstan has also increased crude output in recent days, sources familiar with the data told Reuters, after cutting it due to a bottleneck in its main export pipeline.

In a bearish signal for oil markets, analysts polled by Reuters estimated U.S. crude inventories rose 2.2 million barrels in the week to April 22.

The poll was taken ahead of the release of the American Petroleum Institute’s inventory report at 4:30 p.m. EDT (2030 GMT) on Tuesday. Official data from the government’s Energy Information Administration is expected on Wednesday.

“Attention has shifted to the demand side of the equation and concerns over prolonged supply disruptions have been significantly alleviated by the release of 240 million barrels of SPR oil by IEA members and by the ostensible, if somewhat obfuscated, trade in Russian oil,” said Tamas Varga of oil broker PVM.

Additional reporting by Rowena Edwards in London, Mohi Narayan in New Delhi and Liz Hampton in Denver; Editing by Louise Heavens, David Goodman and Mark Heinrich

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