Fears about new COVID-19 quarantine measures in Shanghai outweighed the solid demand for fuels in the United States, the world’s largest consumer. Oil prices fell on Friday but remained close to three-month highs.
Brent crude futures for August were down 77 cents, or 0.6%, to $122.30 a barrel as of 0448 GMT, after falling 0.4% the previous day. West Texas Intermediate (WTI) July crude fell 72 cents, or 0.6%, to $120.79 after falling 0.5% on Thursday.
Still, with prices rising overall over the past two months, Brent is on track for fourth straight weekly gains, and WTI is poised for seventh straight weekly gains. On Wednesday, both benchmarks marked their highest closes since March 8, their highest contracts in 14 years.
Shanghai’s new pandemic restrictions have raised concerns about demand in China.
Losses were, however, limited by expectations that tight global supply will continue, driven by US demand for fuels and the slow rise in crude oil production by OPEC+.
A new COVID alert was returned on Thursday after parts of China’s biggest economic centers like Shanghai and Beijing imposed new lockdown restrictions and a series of mass tests were announced for Shanghai’s millions of residents.
There has been some optimism in May about China’s demand with the lifting of restrictions in Shanghai and Beijing, however, the recent move to lock certain areas in Shanghai for mass testing shows that there is no change in China’s zero-COVID policy. Economic activity may be affected if restrictions remain in place to limit the spread.
China’s crude oil imports rose nearly 12% in May from a low base level a year ago, but refineries have been grappling with COVID-19 lockdowns and the economy and high inventories that have slowed fuel demand.
Meanwhile, high summer fuel demand in the United States continues to push up crude oil prices. Record increases are seen in gasoline and diesel consumption. Similar increases in pump prices alongside lower inventories point to a vulnerable market to supply disruption and concerns that once drove a sharp drop in demand.
The United States and other countries have embarked on a series of strategic reserve releases, but these have had a limited impact on the global crude oil supply.
