SINGAPORE: Oil prices slipped on Fridaybut remained within touching distance of three-month highs asfears over new COVID-19 lockdown measures in Shanghai outweighedsolid demand for fuels in the United States, the world’s topconsumer.
Brent crude futures for August were down 33 cents,or 0.3%, at $122.74 a barrel at 0647 GMT, after dropping to aslow as $121.60 earlier in the session and declining 0.4% on theprevious day.
U.S. West Texas Intermediate crude for July fell 29cents, or 0.2%, to $121.22 a barrel, having dropped 0.5% onThursday.
Still, with prices overall rallying in the past two months,Brent was on track for a fourth consecutive weekly gain and WTIwas set for a seventh straight weekly increase. Both benchmarkson Wednesday marked their highest closes since March 8, whenthey reached 14-year peaks.
“Oil has continued retreating in Asia, driven by Chinaslowdown fears after widened COVID mass testing was announcedfor Shanghai this weekend,” Jeffrey Halley, a senior marketanalyst at OANDA, said.
“Any losses are going to be limited though, as the physicaltightness of both crude and refined products globally remainpowerful supportive factors.”
Shanghai and Beijing went back on a fresh COVID alert onThursday. Parts of Shanghai imposed new lockdown restrictionsand the city announced a round of mass testing for millions ofresidents.
“We were just starting to get optimistic about Chinesedemand with lifting of restrictions in Shanghai and Beijing, andthe latest move to lock down certain regions in Shanghai formass testing is a reminder that there is no change in China’sCOVID policy,” said Madhavi Mehta, commodity research analyst atKotak Securities.
“If it continues to use restrictions to limit the spread,economic activity may be impacted.”
China’s crude oil imports in May were up nearly 12% on ayear earlier, when they were low. But refiners were stillbattling high inventories, with COVID-19 lockdowns and a slowingeconomy weighing on fuel demand last month.
Meanwhile, peak summer fuel demand in the United Statescontinues to boost crude prices.
“The summer driving season in the U.S. is seeing recordsurges in gasoline and diesel consumption, although comparablesurges in pump prices, next to low stocks, point to a marketvulnerable to supply disruption and concerns about a sharpdrop-off in demand, once peak demand season fades,” analysts atFitch Solutions said in a note.
The United States and other countries have engaged in aseries of releases of strategic reserves, but these have hadlimited effect, with global crude supply rising very slowly.
