Oil prices rose about 1% during trading on Monday, with the increase in demand in the United States for fuel and the scarcity of supply.
This comes as Shanghai, the economic capital of China, is happy to reopen its doors after a two-month closure; This has raised concerns about a sharp slowdown in growth.
This rise in oil prices comes after the decline in early trading with a state of uncertainty among investors about the recovery of fuel demand with the weak pace of global economic growth and the tightening of monetary policy by central banks.
On the other hand, the weekly report of Baker Hughes showed an increase in oil drilling rigs in the United States during the past week, by about 13 excavators, bringing the total to 576 excavators.
Oil prices today
The price of the futures contract for the benchmark Brent crude – for delivery next July – increased by 0.92%, to reach 113.70 dollars per barrel.
The price of future contracts for West Texas Intermediate crude – for delivery next July – increased by 0.82%, recording 111.07 dollars per barrel.
Last Friday, oil prices ended up trading after a volatile session, to record weekly gains for the fourth time in a row.
“Oil prices are supported as gasoline markets remain tight amid strong demand heading into peak US driving season,” said Stephen Innes, managing partner of SBI Asset Management.
“Refineries are usually in an intensifying mode to feed the relentless thirst of American drivers at the pump,” he added.
Peak driving season in the United States traditionally begins on Memorial Day weekend at the end of May and ends on Labor Day in September.
Analysts said that despite concerns about rising fuel prices, which could dampen demand; Mobility data has gone up in recent weeks; Evidence that more people were on the roads in places like the United States.
The weakness of the US dollar also led to a rise in oil prices, today, Monday; This made crude oil cheaper for buyers holding other currencies.
Demand for oil in China
However, market gains were capped by concerns about China’s efforts to respond to coronavirus lockdowns, even though Shanghai was announced to reopen on June 1.
The shutdown in China, the world’s largest oil importer, has hurt industrial production and construction; This prompted steps to support the economy, including a larger-than-expected mortgage rate cut last Friday.
“Covid-19 shutdowns are a temporary drag on demand in China, although demand elsewhere is holding up well,” ANZ analysts said in a note.
Analysts added, “We expect a rebound in industrial activity with the start of stimulus measures,” .
The inability of the European Union to reach a final agreement on Russia’s oil embargo for the invasion of Ukraine, which Moscow calls a “special operation”, has also prevented oil prices from rising much more.
Oil prices are under strong pressure with expectations that the tightening of monetary policy will harm economic activity and, consequently, the demand for fuel.
Although monetary policy in Japan is going against the global shift towards monetary tightening, central banks in the US, UK and Australia have recently raised interest rates.
And if the US growth data continues to deteriorate, oil prices may decline amid a broader circle within the stock market, said Stephen Innes, managing director of asset management at SBI, during a note to clients carried by Reuters.
And a report by the Federal Highway Administration on vehicle mileage shows that Americans are back on the roads despite rising fuel prices.
Commercial oil stocks in the United States recorded the first decline in 4 weeks, and the American strategic oil stockpile fell by 5 million barrels, to its lowest level since 1987.
Meanwhile, Iran is facing difficulty in selling its crude oil at the present time after the availability of more Russian barrels.
Iran’s crude oil exports to China have fallen sharply since the start of the Ukraine war, as Beijing favored cheap Russian barrels, leaving about 40 million barrels of Iranian oil stored in tankers at sea in Asia looking for buyers.