- Oil finds support at the beginning of the week near multi-week highs and the EU oil embargo on Russia is expected to be applied soon.
- WTI has been trading in the $110 region but has been unable to reach the late March highs of $116.50.
- Concerns about the Chinese economy weakening in the wake of weak economic data appear to be holding things back for now.
oil prices they have had a choppy start to the week, although they remain reasonably well supported. WTI futures prices last month hit their highest levels since late March at $111.50, but have since retreated to around $110, where they are trading virtually unchanged on the day. The foreign ministers of Germany and Austria said on Monday they hope the EU will reach an agreement on a proposed embargo on Russian oil imports by the end of this week, despite ongoing Hungarian resistance.
This appears to have negated the negative impact on prices from weaker-than-expected April Chinese retail sales and industrial production data released over the weekend. The data highlights a drastic and continuing slowdown in the economy there as a result of strict lockdowns to contain Covid-19, which analysts say now affects 46 cities and up to 40% of China’s GDP.
The lockdowns have had a chilling impact on oil demand in China. Data released by China’s National Bureau of Statistics on Monday, along with the aforementioned industrial production and retail sales figures, showed that refineries in China processed crude oil at the slowest pace in two years in April. So-called refinery “throughput” fell to 12.61 million barrels per day (BPD) from 13.8 million BPD in March and 14.09 million BPD in April 2021.
So while crude oil prices remain well supported on Monday, the focus on economic/oil demand weakness in China likely prevented WTI from breaking out to the upside. However, the local press in China reports that the situation in Shanghai is improving (although not yet in Beijing). If this narrative gets more traction this week in conjunction with an EU-agreed ban on Russian oil, a push towards the late-March highs of $116.50 is on the cards.
Technical levels
Source: Fx Street
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