Oil prices recoup early losses on China’s hopes
Oil prices gained on Thursday, recovering from early losses, hoping that planned limitations eased in Shanghai would boost gasoline consumption. However, concerns about tight global supply outweighed concerns about weaker economic growth.
Brent crude futures were up $1.53, or 1.4 percent, at $110.64 a barrel at 0447 GMT, after losing more than $1 earlier in the session.
WTI crude futures in the United States increased 93 cents, or 0.8 percent, to $110.52 a barrel in June, recouping a more than $2 loss. WTI was up $1.57, or 1.5 percent, to $108.50 per barrel in July.
On Wednesday, both benchmark prices decreased by nearly 2.5 percent.
Asian stocks fell in lockstep with Wall Street as investors worried about rising global inflation, China’s zero-COVID policy, and the Ukraine crisis.
Still, oil markets are bullish, as the European Union’s forthcoming import embargo on Russian crude is likely to reduce global supplies significantly.
The European Union recommended further sanctions against Russia this month in response to its invasion of Ukraine. It would entail a total ban on oil imports within six months, but the steps have yet to be implemented, with Hungary among the most outspoken opponents of the idea.
On Wednesday, the European Commission revealed a 210 billion euro ($220 billion) plan for Europe to phase out its reliance on Russian fossil fuels by 2027 and utilize the shift away from Moscow to accelerate its transition to green energy.
Also, U.S. oil stockpiles decreased unexpectedly last week as refiners cranked up output due to low product inventories and near-record exports, driving U.S. diesel and gasoline prices to record highs.
Capacity utilization on both the East and Gulf Coasts exceeded 95 percent, bringing both refineries near their maximum operating rates.
Oil and gas offer a practical path to net-zero
Energy vulnerability is not an option for the United States. The sad events in Ukraine have demonstrated how a disruption in energy supply can have an asymmetric effect on consumer pricing. Inflation in the United States reached 8.5 percent in March, the highest level in four decades. The catastrophic national security implications for an energy-stressed America in an uncertain world are even more concerning.
Several significant initiatives are currently underway in the United States, Canada, and Europe that promise to redefine the Western world’s energy transition roadmap, focused on hydrogen generation and net-zero energy.
Some think that avoiding oil and gas is the best option now. According to the United States Energy Information Administration’s Energy Outlook 2022, the technically recoverable resources of 3,000 TCF of gas alone are enough to last over a century at present consumption rates. Oil businesses in the United States are ideally positioned to take a leading role in the energy transition by repurposing – not abandoning – the country’s hydrocarbon endowment to produce energy and high-value carbon products aligned with net-zero ambitions.
When it comes to the global energy shakeup, China is reasonably strong. Cheap Russian crude, which a Western embargo has hammered, is making its way to Asia, but the increase to the world’s largest importer has been less dramatic than in India. And, in the absence of a European embargo, buyers such as Italy continue to scoop it up. Russian cargoes with transportation and insurance charges received discounts of $8 or more per barrel to Brent. According to energy firm Wood Mackenzie, about 650,000 barrels of daily Russian crude oil formerly delivered to developed countries such as the EU could be replaced with similar grades and volumes from the Middle East that are currently shipped mainly to China and India.
