Oil futures contracts closed sharply higher this Wednesday (11) in a session marked by volatility. The release of consumer inflation data (CPI) from the United States weighed heavily on oil, but the fall in the dollar and factors on the demand and supply sides overlapped.
On the demand side, the commodity benefited from signs that the pandemic is waning in some regions of China. On the supply side, risks remain, amid Russia’s sanctions against countries that depend on its gas. Investors also followed the rise in oil inventories and the drop in gasoline and distillates.
On the New York Mercantile Exchange (Nymex), a barrel of WTI oil due for delivery in June rose 5.96% ($5.95) to $105.71 a barrel, while Brent crude advanced 4.93%. ($5.05), At $107.51, on the Intercontinental Exchange (ICE).
Oil started the session favored by data showing signs of improvement from the pandemic in China. New cases of covid-19 in Shanghai have dropped by 50.7% in the last 24 hours, reaching 1,487 infections – the lowest mark in 18 days.
In addition, no community spread infections have been reported in eight districts, raising expectations that the city will be able to escape stricter restrictions compared to those that have been in place for about six weeks now.
However, contracts pared gains after the US CPI, which rose 0.3% in April from March, beating analysts’ expectations for a 0.2% rise.
On the other hand, the index decelerated in relation to the advance of 1.2% in the previous month. For Pantheon, the CPI does not change the short-term outlook for the Federal Reserve’s (Fed) monetary policy, which is expected to raise the benchmark interest rate by 50 basis points at its next two meetings, in June and July.
Later, oil regained strength, amid the fall of the dollar and remained so after the United States Department of Energy (DoE) reported that inventories of the commodity in the country rose by 8.487 million barrels last week, compared to expectations of drop of 300 thousand.
Gasoline, on the other hand, fell 3.607 million barrels, while the projection was for a drop of 1.7 million barrels, and distillates fell 913,000 barrels, compared to a low expectation of 1 million barrels.
The commodity gained even more traction in the wake of Russia’s decision to apply sanctions to the parent company of a gas pipeline linking the country with Belarus, Poland and Germany. Gazprom Germania was also targeted by the measures.
According to Edward Moya of Oanda, the oil market appears to have made up its mind and will focus on how tight supplies will be rather than the eventual destruction of demand that could happen later this year.
The Institute of International Finance (IIF) says that an EU embargo on Russian oil and oil products “would have an impact”. In a report, the institute formed by banks recalls that the details are still being discussed, but projects “significant reductions in the volume exported by Russia in 2022”.
For TD Securities, global commodity demand growth is wavering, but energy markets are likely to remain insulated from demand headwinds as energy supply risk continues to rise. “Our decomposition continues to signal that the risk of energy supplies is increasing despite the EU imbroglio over banning Russian oil. In this context, supply risk still remains significantly underpriced, setting the stage for a substantial recovery in energy markets as the headwinds of transient demand subside.
Source: CNN Brasil
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