The corona situation in China has eased in some areas, but the government still sticks to the zero-Covid strategy. A growing supply in the market is also depressing oil prices.
Oil prices fell Thursday after two straight days of gains. In the morning, a barrel (159 liters) of Brent from the North Sea cost 108.05 dollars. It was 73 cents less than Wednesday. The price per barrel of West Texas Intermediate (WTI) fell $1.13 to $103.12.
More recently, the prospect of growing demand for crude oil has pushed prices higher after the relaxation of otherwise strict corona measures in the Chinese financial metropolis of Shanghai.
In some residential areas, people are again allowed to leave their homes, but must observe distancing rules. Other residential areas remain strictly closed.
Xi defends a difficult course
Despite the associated economic damage, Chinese President Xi Jinping is sticking to a strict zero-Covid course. “We must continue to put people above everything, life above everything,” Xi said Thursday, according to state media. “The current global pandemic is still very serious, we must not slack off on prevention and control work. Perseverance brings victory.”
As the world’s second largest economy, China is one of the biggest consumers of oil. In addition, the country’s central bank is expected to take further measures to support the faltering economy.
Release of oil reserves increases supply
However, there are currently arguments in favor of an increase in oil supply, which is likely to drive down oil prices. US crude oil inventories have surprisingly increased significantly over the past week, as announced on Wednesday.
In addition, member states of the International Energy Agency released national oil reserves to mitigate the economic consequences of the war in Ukraine. The International Energy Agency is therefore lowering its forecast for the price of Brent oil, like the OPEC countries before it.
The IEA had previously assumed there would be a shortage this year. But even in the second half, the market should remain balanced, it is now said. According to Commerzbank experts, oil reserves released in the United States should compensate for the expected shortfall in oil production in the second half of the year.