On Track For Lower Weekly Close As Supply Worry Takes Back Seat

WTI and Brent are ~$1.20 worse off, operating around session lows, and a touch above their respective worst levels on Thursday at typing.

• Both benchmarks are on track for a lower weekly close particularly after Tuesday’s ~$6 decline, with the move lower coming as well-documented worry re: demand destruction due to China’s ongoing COVID outbreak, and continued debate over the possibility of stagflation has taken focus over the past week.
• Looking to China, fresh COVID case counts nationwide and in the city of Shanghai appear to have plateaued for now, with reported daily case counts in the latter coming in below 20K for a second consecutive day (a note that new cases “outside quarantined areas” in the city continue to number in the low hundreds). The pace of relaxation in citywide lockdowns remains abundantly cautious, with focus turning to the re-opening of factories through “closed-loops” after around three weeks of closures. City authorities have so far declared that around 70% of the city’s industrial companies have resumed operations to date, although previously flagged source reports have pointed to possible issues some companies have faced in restarting operations.
• Recent Dollar strength has also helped limit gains in crude, with the DXY operating a touch below 2-year highs made earlier this week.
• Elsewhere, RTRS source reports have highlighted the European Commission’s efforts to “cut the cost” of banning Russian oil such as through exploring national-level deals with oil-producing countries, likely targeting well-documented resistance from EU members such as Germany and Austria. Looking at timelines, POLITICO reports are pointing to details of an EU-wide ban on Russian oil imports possibly emerging early next week, although evidence so far points to the likelihood of any embargo being proposed in phases (as with coal), as opposed to an outright ban.