Oil prices continue to rise because of easing restrictions in China and a recovery in demand and shortages in the US.
Brent crude rose 23 cents, or 0.2%, to $112.16 a barrel at 0633 GMT.
West Texas Intermediate (WTI) rose 71 cents, or 0.6%, to $113.11 a barrel, slightly offsetting previous losses.
So far, about 900 financial institutions in Shanghai are reopening after no new cases of Covid-19 for 3 consecutive days.
“The less dire news from China suggests biting the tail in the form of much higher oil demand and oil prices, which is good for producers but bad for consumer sentiment,” said Steven Innes, managing partner at SPI Asset Management.
Oil is heading for its sixth surge in a month, possibly pushing the price to a ten-year high, due to continued support from the war in Ukraine, supply disruptions and ever-increasing demand.
An increase in the price of oil affects inflation, and consequently, an increase in interest rates by the Fed to curb price increases.
The American Petroleum Institute reported a reduction in gasoline inventories by 5 million barrels, crude oil inventories also fell by 2.4 million barrels. Official US government data is expected later Wednesday.
“Rising diesel and distillate prices, as well as limited crude oil inventories, are supporting WTI and I believe the situation will limit the oil price drop from here over the next few sessions,” said OANDA Senior Analyst Geoffrey Halley.
Despite US President Joe Biden’s orders to release strategic stocks of crude oil, gasoline prices at gas stations and in futures contracts have reached unthinkable levels.
According to the AAA Automobile Club, gasoline retails for $4 a gallon, and in the most expensive state of California, even more than $6 a gallon.
Gasoline inventories are already down 3% in 2022.
By the EU summit at the end of May, diplomats expect to reach an agreement with Hungary regarding a step-by-step refusal of Russian oil by the countries of the European Union.
At the same time, reports surfaced that the US had temporarily lifted its ban, allowing Chevron Corp (NYSE: CVX) to negotiate oil licenses with Venezuela’s national producer. A positive outcome of the negotiations will help increase the amount of crude oil on the market, which will partially reduce the shortage of the resource, but is unlikely to overcome it.
Now short-term oil prices are trading above long-term ones. Compared to $5/bbl at the beginning of the year, the spread between the next two WTI contracts in December is about $13/bbl.
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