Oil Steady As Economic Concerns Outweigh Potential China Rising Demand

Oil prices remained relatively unchanged on Friday, as fears of a slowdown in economic development were countered by predictions of a rebound in petroleum consumption in China after Shanghai lifted some coronavirus restrictions.

Brent futures for July delivery dropped 36 cents, or 0.3%, to $111.68 per barrel by 00:15 GMT, while U.S. West Texas Intermediate (WTI) crude slid 36 cents, or 0.3%, to $111.85 per barrel on its last day as the front-month.

WTI futures for July, which will shortly be the front month, decreased almost 0.6% to $109.20 per barrel.

This positioned WTI to advance for a fourth consecutive week, the first time since mid-February. Brent was up less than 1 percent after a weekly decline of less than 1 percent.

Due to the unclear route of demand, Brent and U.S. benchmarks have largely traded in a range this week, limiting gains in crude oil. Concerned about increasing inflation and more aggressive central bank action, investors have reduced their exposure to risky assets.

On May 18, open interest in WTI futures decreased to 1.72 million contracts, the lowest level since July 2016.

Stephen Innes, managing director of SPI Asset Management, wrote in a client note, "If U.S. growth data continues to deteriorate, oil prices could be ensnared in the negative stock market feedback loop."

Thursday's turbulent day on Wall Street resulted in a decline, as investors fretted about inflation and rising interest rates.

As Shanghai officials lifted some coronavirus lockdowns and residents were permitted to go grocery shopping for the first time in two months, oil consumption could rebound in China. China is the world's largest importer of crude.

According to a survey on vehicle miles from the Federal Highway Administration, despite rising fuel prices, Americans have resumed driving in the United States.

The AAA reported that gasoline and diesel prices at the pump reached record highs on Thursday.

The U.S. House has passed a bill that authorizes the president to declare an energy emergency, making it illegal for firms to raise gasoline and home fuel costs significantly.

The threat of a ban on Russian oil imports by the European Union has helped support prices. This month, the European Union proposed a fresh round of sanctions against Russia in response to its invasion of Ukraine, which Moscow refers to as a "special military operation."

In six months, these sanctions would entail a total embargo on oil imports, but the measures have not yet been implemented; Hungary is among the most outspoken opponents of the idea.

Meanwhile, Iran is having a harder difficulty selling its crude oil now that there are more Russian barrels available.

Since the beginning of the Ukraine conflict, Iran's crude supplies to China have decreased significantly, as Beijing has favored heavily discounted Russian barrels. As a result, about 40 million barrels of Iranian oil are currently held aboard tankers at sea in Asia, seeking customers.