Oil: Oil eases as China lockdowns weigh on demand outlook

SINGAPORE (Reuters) – Oil fell slightly on Friday as COVID-19 lockdowns in China weighed on the outlook for crude demand, although fears of supply disruption as Western sanctions curb exports crude and products from Russia supported prices.

Brent crude futures fell 4 cents to $107.55 a barrel at 0040 GMT after rising 2.1% in the previous session. The contract for the first month of June expires later on Friday. The more active July contract fell 30 cents to $106.96 a barrel.

U.S. West Texas Intermediate crude fell 49 cents, or 0.5%, to $104.87 a barrel after rising 3.3% on Thursday.

Both contracts are expected to end the week higher, with WTI on track to post five consecutive months of gains, supported by the increased likelihood that Germany will join other European Union member states in a trade embargo. Russian oil.

Still, oil prices have been volatile as Beijing has shown no signs of easing lockdown measures despite the impact on its economy and global supply chains.

“With the intensification of full and partial lockdowns since March, China’s economic indicators have dipped further into the red. We now expect China’s GDP to slow further in the second quarter,” Yanting Zhou, head of APAC economics at Wood Mackenzie, said in a note.

“Oil market volatility is set to continue, with the potential for more widespread and prolonged lockdowns into May and beyond, skewing near-term risks for China’s oil demand – and prices – to the downside. .”

On supplies, OPEC+ is expected to stick to its existing deal and agree another small production increase for June at its May 5 meeting, six sources from the group told Reuters on Thursday. of producers.

However, Russia’s oil production could fall by as much as 17% in 2022, an economy ministry document seen by Reuters showed on Wednesday, as Western sanctions imposed on Moscow over its invasion of Ukraine dragged down. hurt investment and exports. Russia calls it a “special military operation” to disarm Ukraine.

The sanctions have also made it increasingly difficult for Russian vessels to ship oil to customers, prompting Exxon Mobil Corp to declare force majeure for its Sakhalin-1 operations and cut production.

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