The Perfect Enemy | Oil lifted on China COVID worries, tight supplies
July 5, 2022
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Oil futures rose Tuesday, finding support as China implemented fresh COVID-19 restrictions and worries remained over supply disruptions in Libya.

Price action
  • West Texas Intermediate crude for July delivery CL.1, +2.21% CL00, +2.21% CLN22, +2.21% rose 96 cents, or 0.8%, to $121.89 a barrel on the New York Mercantile Exchange.
  • August Brent crude BRN00, +2.31% BRNQ22, +2.31%, the global benchmark, was up $1.07, or 0.9%, at $123.34 a barrel on ICE Futures Europe.
  • Back on Nymex, July gasoline RBN22, +2.12% rose 1.2% to $4.083 a gallon, while July heating oil HON22, +3.71% gained 1.3% to $4.3396 a gallon.
  • July natural gas NGN22, -17.42% was up 0.7% at $8.667 per million British thermal units.
Market drivers

Beijing implemented a mass testing program Monday after a COVID outbreak tied to a nightclub and put other restrictions in place.

“The easing of Covid-related restrictions in China should have provided a further boost to sentiment in the market. However, a flare-up of cases in Beijing and Shanghai more recently has seen authorities tighten restrictions once again. China’s COVID-zero policy remains a downside risk for the market,” said Warren Patterson, head of commodities strategy at ING, in a note.

The Organization of the Petroleum Exporting Countries on Tuesday left its forecast for 2022 growth in oil demand broadly unchanged at 3.4 million barrels a day. On the supply side, the organization revised down its forecast for non-OPEC liquids growth in 2022 to 2.1 million barrels a day, down by 250,000 barrels a day from its May estimate. That’s equal to the downward revision for Russia’s 2022 production, while the forecast for U.S. liquids supply growth was marginally unchanged at 1.3 million barrels a day.

The White House on Tuesday said President Biden will visit Saudi Arabia in July as part of a trip to the Middle East. The visit, which had long been speculated, is seen as an effort to mend relations with the kingdom.

Meanwhile, Libyan Oil Minister Mohamed Oun told Bloomberg on Monday that the country’s daily output was down about 1.1 million barrels, implying that Libya is pumping only around 100,000 barrels a day.