Oil prices have topped $113 per barrel on optimism that China’s lockdowns are coming to an end and demand will not take a prolonged hit.
In early afternoon markets Monday, news that Shanghai was seeing a strong recovery from COVID cases, with plans in place to ease lockdown restrictions beginning this week, outweighed a litany of bearish news for oil.
Brent was at $113.6 per barrel on 1:38 pm EST, while WTI was trading at $113.5.
Authorities in Shanghai on Monday said restrictions would finally ease, in stages, after nearly six weeks of lockdowns that have shaken the Chinese economy and disrupted global supply chains.
On 1 June, Shanghai is scheduled to see lockdowns end, with a gradual easing beginning on May 21st.
“From June 1 to mid- and late June, as long as risks of a rebound in infections are controlled, we will fully implement epidemic prevention and control, normalise management and fully restore normal production and life in the city,” the Guardian quoted deputy mayor Zong Ming as saying Monday.
The announcement comes shortly after downward pressure was put on oil prices over new releases of weak Chinese economic data and signals that the European Union’s plans to ban Russian oil had faltered.
On Monday, China published official economic data, showing a significant slowdown, with industrial output falling by nearly 3% year-on-year in April, and retail sales down by around 11%. Shanghai’s port volumes were also down by 40%, according to DW.
All of this has led to a decline in demand for oil coming out of China.
However, according to new data from the Saudi Arabia-based Joint Organizations Data Initiative (JODI), global oil demand surpassed pre-pandemic levels in March, at 101%, despite declines in Chinese demand. However, the report noted that crude oil production was at 97% of pre-COVID levels. The data is based on submissions that account for 70% of global oil demand and 55% of global crude production.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com