Oil Futures Edged Lower on Friday, Pressured by Fresh COVID Lockdowns

Recap:  Oil futures edged lower on Friday, pressured by fresh COVID lockdowns in Shanghai and Beijing, while hefty fuel demand in the U.S. kept a floor under prices.  Oil prices are also garnering support from the threat of potential disruption in supplies in Europe and Africa. Also on the international front, the prospect of reaching a nuclear deal with Iran and the lifting of U.S. sanctions on the Iranian energy sector also seemed to be receding, providing further support to the oil rally. July WTI fell 84 cents, or 0.69%, to $120.67 per barrel, but was up $1.80 or $1.1% on the week, marking the seventh consecutive week of gains. Front Month Brent Crude for August delivery closed down $1.06 or 0.86% but gained $2.29 per barrel, or 1.91% to $122.01 this week. Month NYMEX RBOB Gasoline for July delivery settled down 10.40 cents, or 2.43% to settle at $4.1722 per gallon and down 8.00 cents per gallon, or 1.88% for the week. Month NYMEX ULSD for July delivery gained 8.64 cents per gallon, or 2.02% to $4.3667 on the week, down 3.70 cents or 0.84% for the session.

Technical Analysis: The overall fundamentals for the oil market remain supportive, except for the announcement Thursday of new COVID-19 restrictions in China. With more lockdowns taking place in small areas of China, demand will be minimally impacted. Should conditions worsen and spread to larger areas within China, demand will weaken and in turn have a negative impact on prices. Traders will be keeping an eye on this situation. Support is seen at $118.50 and below that at $110.00. Resistance above the channel remains at $122.80 and $130.50.  

Fundamental News:  White House economic adviser, Cecelia Rouse, said U.S. President Joe Biden is looking at ways to bring in more oil supplies amid rising energy costs, including working to address oil refinery capacity. Last week, a U.S. official said the White House is considering proposals that would tax oil and gas windfall profits.

The U.S. oil and natural gas rig count increased this week for the first time in three weeks. Baker Hughes reported that the oil and gas rig count increased by six to 733 in the week ending June 10th, its highest since March 2020. U.S. oil rigs increased by six to 58, their highest level since March 2020, while gas rigs were unchanged at 151 for a third consecutive week.

Saudi Aramco has notified at least five North Asian refiners, mostly Chinese, that it will be supplying less than contracted volumes of crude oil in July.

The Norwegian Oil and Gas Association said Norway's petroleum output could be reduced if workers go on strike on Sunday. Trade unions Safe, Industri Energi and Lederne have said that about 845 workers out of 7,500 employees on offshore platforms plan to strike starting June 12th if annual pay negotiations with employers fail.

Engineers said a blockade of Libyan oil output by groups aligned with forces in the east of the country expanded on Thursday and Friday with the closure of two more export terminals, a threat to close another, and reduced production at a major field. Engineers at Sarir field said production had been reduced.

The U.S. EIA expects refinery utilization to average 96% in June, 94% in July and 96% in August.  It said wholesale prices for gasoline and diesel will begin decreasing in the third quarter of 2022 as refinery production increases. U.S. refinery utilization will be relatively high this summer in response to strong wholesale prices for petroleum products.

IIR Energy reported that U.S. oil refiners are expected to shut in 370,000 bpd of capacity in the week ending June 10th, increasing available refining capacity by 207,000 bpd.

Early Market Call – as of 8:15 AM EDT

WTI – July $118.87, down $1.80

RBOB – July $4.0998, down 7.24 cents

HO – July $1.3396, down 2.71 cents

View the Sprague Refined Products Market Watch Report in a downloadable pdf format by clicking below.

Click to view more online:
Heating Oil Supplier

Diesel Supplier
View market updates
View our refined products glossary
Go to SpraguePORT online

Share:
RSS
Follow by Email
Facebook
X (Twitter)

This market update is provided for information purposes only and is not intended as advice on any transaction nor is it a solicitation to buy or sell commodities. Sprague makes no representations or warranties with respect to the contents of such news, including, without limitation, its accuracy and completeness, and Sprague shall not be responsible for the consequence of reliance upon any opinions, statements, projections and analyses presented herein or for any omission or error in fact. The views expressed in this material are through the period as of the date of this report and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance or results and actual results or developments may differ materially from those projected. The whole or any part of this work may not be reproduced, copied, or transmitted or any of its contents disclosed to third parties without Sprague’s express written consent.