Skip to main content

Oil prices rebounded in volatile trading on Tuesday as the market weighed China’s plans to support its economy against a possible coronavirus lockdown in its capital Beijing.

Brent crude futures settled up $2.67, or 2.6%, at $104.99 a barrel, while U.S. West Texas Intermediate contracts were up $3.16, or 3.2%, at $101.70.

Brent and WTI had settled down about 4% on Monday and touched respective lows on Tuesday of $101.08 and $97.06 a barrel, pressured by concerns over demand in China, the world’s largest crude oil importer.

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

China’s central bank said on Tuesday it will step up prudent monetary policy support to the nation’s economy and any stimulus would help boost oil demand amid worries about a slowdown in global growth.

“Oil traders are putting Beijing lockdown fears in the rear-view mirror and instead are focusing on more stimulus coming from China,” said Phil Flynn, an analyst at Price Futures Group.

The Chinese capital Beijing has expanded its COVID-19 mass testing to much of the city of nearly 22 million as the population braces for a lockdown similar to Shanghai’s stringent curbs.

Weather-related outages in production in North Dakota’s Bakken shale basin after snow storm knocked power and extreme products strength with emphasis on diesel prices are driving up the market, said Scott Shelton, energy specialist at United ICAP.

Russian energy giant Gazprom told Poland’s PGNiG it will halt gas supplies along the Yamal pipeline from Wednesday morning, PGNiG said in a statement. Gazprom said on Tuesday that Poland would need to begin making payments under a new scheme as of Tuesday.

“Russia demanding payment in Rubles from Poland is likely to result in a halt in Gas supplies and will also contribute to even stronger diesel prices” Shelton added.

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

The European Union continued to consider options to cut imports of Russian oil as part of possible further sanctions against Moscow over its invasion of Ukraine, but nothing has been formally proposed.

Germany said it hopes to replace all deliveries of oil from Russia in a matter of days, while commodities trader Trafigura Group said it will stop all purchases of crude oil from Russia’s state oil company Rosneft by May 15.

Still, analysts said the release of oil from emergency reserves has eased concerns over tight supply.

Kazakhstan has also ramped up crude production over the past few days, sources familiar with the data told Reuters, after curtailing it due to a bottleneck on its major exports pipeline.

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

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

“Focus has shifted toward the demand side of the equation and worries about prolonged supply disruptions have greatly been mitigated by the release of 240 million bbls of SPR oil by IEA members and by the ostensible, albeit somewhat obscured, dealing in Russian oil,” said Tamas Varga of oil broker PVM.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe