Oil is bouncing back on China’s plans to support its economy

Storage tanks at the Petronius Ineos gasoline refinery in La Vera, France, March 29, 2022. REUTERS/Benoit Tessier

HOUSTON, April 26 – Oil prices rebounded in choppy trading on Tuesday as the market weighed down China’s plans to support its economy against lockdowns in the nation’s capital.

Brent crude futures rose $2.37, or 2.3%, to $104.71 a barrel by 11:50 AM ET (15:51 GMT). US West Texas Intermediate contracts rose $2.65, or 2.7%, to $101.21.

Brent and West Texas Intermediate settled down about 4% on Monday and touched Tuesday’s lows of $101.08 and $97.06 a barrel, weighed by concerns about demand in China, the world’s largest importer of crude oil.

China’s central bank said on Tuesday it would step up prudent monetary policy support for the country’s economy and any stimulus that would help boost oil demand amid fears of slowing global growth.

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

The Chinese capital, Beijing, has expanded its mass testing for COVID-19 to a large part of the city of nearly 22 million as residents prepare for a lockdown similar to the strictest restrictions in Shanghai. Read more

Adding to supply problems, the European Union has continued to consider options to reduce Russian oil imports as part of other possible sanctions against Moscow over its invasion of Ukraine, but nothing has been formally proposed as governments assess their impact.

German Economy Minister Robert Habeck said on Tuesday that Germany had said it hoped to replace all oil shipments from Russia within days. Read more

A company spokesman said on Tuesday that commodity trading group Trafigura Group will halt all purchases of crude oil from Russia’s state oil company Rosneft by May 15. Read more

However, analysts said freeing oil from emergency reserves eased concerns about supply shortages.

Sources familiar with the data told Reuters that Kazakhstan has boosted crude production over the past few days, after it was forced to reduce it due to a bottleneck in its main export pipeline.

The Caspian Sea Pipeline Consortium and the Black Sea Terminal, which ships about 80% of Kazakhstan’s crude exports, returned to full capacity on Saturday after operating at half capacity for several weeks due to mooring points damaged by the storm.

In a bearish sign for oil markets, five analysts polled by Reuters estimated on average that US crude inventories increased 2.2 million barrels in the week ending April 22.

The survey was conducted before the release of the inventory report from the American Petroleum Institute at 4:30 PM ET (2030 GMT) on Tuesday. Official government Energy Information Administration data is due on Wednesday.

He said: “The focus has shifted toward the demand side of the equation, and concerns about prolonged supply disruptions have been greatly eased by the release of 240 million barrels of SPR oil by members of the International Energy Agency and the apparent, albeit somewhat ambiguous, dealing in oil. Russian”. Tamas Varga of the PVM oil broker.

Valero Energy Company (VLO.N)It, the first US refiner to report earnings this quarter, said it expects product demand to remain healthy.

Additional reporting by Rowena Edwards in London, Mohi Narayan in New Delhi and Liz Hampton in Denver. Editing by Louise Heavens and David Goodman

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