Oil futures: Crude prices ease on Covid, heads for slim weekly gains
Quantum Commodity Intelligence - Crude oil futures Friday eased back from recent gains as China imposed Covid restrictions on a growing number of cities, but benchmark prices were still looking at weekly increases of 2-2.5%.
January ICE Brent futures were trading at $93.34/barrel (1730 GMT), compared to Thursday's settle of $95.04/b, while Dec22 was trading at $95.35/b heading into the expiry on Monday.
At the same time, Dec22 NYMEX WTI was trading $87.33/b versus Thursday's settle of $88.76/b.
A number of cities across China, including Wuhan where the coronavirus was first recorded, have gone into some form of lockdown - as the country pursues leader Xi Jinping's zero-Covid policy.
It comes as China reported a third straight day of more than new 1,000 cases.
However, oil prices have trended higher during the second part of the week after the record US export figures from the EIA signalled demand remains healthy, while fears of oil shortages this winter also shored up prices.
"Not only do we have a situation where we're facing tight supplies of almost everything petroleum across the board, we're adding to the upside risk factor of these prices because of geopolitical war premiums," said Phil Flynn of The Price Futures Group, adding, "there could be significant upside risk in the heating oil market if we have a cold winter."
Persistent tightness in Europe caused by a series of strikes at France's refineries, coupled with declining Russian supply to Europe ahead of a ban in February next year, has pushed up diesel prices relative to crude.
The price spread between diesel cargoes loading in Asia and the price of diesel barges delivered into northwest Europe has risen to the highest level since the early days of the Russia-Ukraine war, according to data collected by Quantum.
Month-ahead (November) swaps for vessels loading in Singapore were pegged Thursday at a five-day rolling average of $107/mt below November low sulfur gasoil futures, the data showed – the widest level since the end of March.
Europe's dependency on Russia for gasoil has already declined from more than 60% in the summer to around 35% currently, according to analysts, meaning European cargoes will be pricing at arbitrage rates from the US and Asia.
SPR probe
Meanwhile, reports that US House Republicans will launch an investigation into what they say could be the "potential misuse" by the Biden administration of the nation's emergency oil reserves may put the breaks on any further SPR releases, particularly if there is a swing towards the Republicans in the upcoming midterm elections.
The probe will also look at White House deliberations for a fuel-export ban, which also looks increasingly likely to be shelved even at the discussion stage under a Republican-majority House.
US officials have also been forced to scale back plans to impose a cap on Russian oil prices, following scepticism by investors and growing risk in financial markets brought on by crude volatility and inflationary concerns.
Instead of shutting off the Kremlin's oil revenues by imposing a strict ceiling on prices that would have been observed by a broad "buyer's cartel" of nations, the US and EU are likely to settle for a more loosely policed cap at a higher price than once envisioned.
Otherwise, the US economy bounced back in the third quarter of 2022 after six months of contraction amid persistent high inflation and gloomy predictions, a preliminary report released on Thursday found.
US GDP, the most comprehensive indicator of economic activity, grew by 2.6% between July and September, data released by the Bureau of Economic Analysis showed.
