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Oil futures rose Tuesday, with the U.S. benchmark pushing back above the $100-a-barrel threshold as China took steps to backstop its economy and avoided a full lockdown of Beijing in response to rising COVID-19 cases.
Price action
-
West Texas Intermediate crude for June delivery
CL.1,
+3.04% CLM22,
+3.05%
rose $2.71, or 2.8%, to $101.25 a barrel on the New York Mercantile Exchange. -
June Brent crude
BRNM22,
+2.65%
rose $2.36, or 2.3%, to $104.52 a barrel on ICE Futures Europe. WTI fell 3.5% Monday, while Brent lost more than 4%. -
May natural-gas futures
NGK22,
+4.08%
rose 3.9% to $6.931 per million British thermal units. -
May gasoline
RBK22,
+2.64%
was up 2.6% at $3.325 a gallon, while June heating oil was up 3.2% at $3.7723 a gallon.
Market drivers
Beijing on Tuesday was enforcing COVID-19 lockdowns and expanding testing in an effort to contain a COVID outbreak in the capital, news reports said. A lockdown of Shanghai, the nation’s largest city and major financial and commercial hub, has already amplified worries over China’s economic growth prospects.
But analysts said the lack of a full lockdown of the capital and an announcement by the People’s Bank of China that it would work to provide monetary policy support to small businesses and industries most affected by the pandemic provided relief.
“Oil prices rebounded big time after the Chinese government failed to impose a lockdown on Beijing and promised more stimulus for people impacted by previous shutdowns,” said Phil Flynn, analyst at Price Futures Group, in a note.
“More stimulus from China could mean more oil demand and that is a sign of hope in a market that has been concerned about slowing demand not only in China but around the world,” he said.
Oil has seen volatile trade in the wake of Russia’s Feb. 24 invasion of Ukraine, with the U.S. benchmark briefly trading above $130 a barrel in early March and Brent nearly touching $140. WTI closed at $92.10 on the eve of the invasion, while Brent was at $94.05.
A close below $93.50 for WTI would confirm a break of an upward trend line, testing the lows of March and the first half of April, said Alex Kuptsikevich, FxPro senior market analyst, in a note.
“If oil gets fixed under $93.50, like in the case of gold before, we might see a relatively quick surrender of the bull speculators, which would take the price back to $82.50-$85.00, the area of October peaks and the 200-day moving average,” he wrote.
