Oil heads for weekly gain as fuel demand drives outlook

 

Bloomberg

Oil headed for a fourth straight weekly gain as optimism about the outlook for demand eclipsed concerns about tighter monetary policy and an economic slowdown that have combined to roil wider financial markets.
West Texas Intermediate futures traded near $112 a barrel, and are heading for the best run of weekly increases since mid-February. Prices has been pushed higher in recent days by higher demand for motor fuels as summer driving season approaches in the US. Gasoline and diesel have surged to record levels, with auto club AAA forecasting nationwide travel will approach the highest since the pandemic.
Crude has surged almost 50% this year, also helped along by Russia’s assault on Ukraine that sent shock waves through markets. While the US and UK have announced bans on Russian exports, flows to Asia have picked up. China is seeking to replenish strategic stockpiles with cheap Russian oil even as officials grapple to suppress Covid-19 outbreaks. India has also boosted purchases.
“Crude oil remains rangebound, caught between focusing on tight monetary policy driving an economic slowdown and a tightening global fuel-product market,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S. “Tightness in global fuel products will underpin fuel prices, already at record levels around the world.”
There were mixed signals from China on Friday. While banks cut a key interest rate for long-term loans by a record to bolster a slowing economy, Shanghai found the first cases of Covid-19 outside quarantine in six days. It raises questions on whether the easing of the city’s lockdown will be impacted.
The global benchmark’s prompt spread, the difference between its two nearest contracts, was $2.39 in backwardation — a bullish pattern — compared with $1.80 a week ago
Oil’s jump has contributed to the fastest inflation in decades, prompting the US Federal Reserve to vow that it’ll go on raising interest rates until there are clear signs that price pressures are easing. That’s spurred wild shifts in investors’ appetite for risk, swinging equity, bond and commodity markets.

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