A Little Below One-Week Highs As Tight Supply Outlook Eyed Against China’s COVID Outbreak

WTI is ~-$0.30 and Brent is ~-$0.10, with both benchmarks operating just shy of their respective one-week highs made on Tuesday.

• China reported 935 fresh COVID cases for Tue (vs. 699 for Mon) as case counts in the hotspots of Guangxi (south) and Gansu (northwest) remain elevated. Meanwhile, Shanghai continues to see declining infections (15 for Tue vs. 23 for Mon) amidst a mass testing drive, while Beijing has seen single-digit case counts for over four weeks.
• Crude benchmarks were largely unmoved following the latest round of API inventory estimates on Tuesday. Source reports pointed to a larger-than-expected build in crude stockpiles with an increase in gasoline and Cushing hub stocks as well, while distillate inventories declined.
• Keeping within the U.S., fracking giant Halliburton has stated that oil companies without equipment for new wells are unlikely to secure them for at least the rest of ‘22 due to supply chain issues, limiting the (already scant) outlook for meaningful increases in near-term U.S. crude output.
• Brent remains in steep backwardation, with the prompt spread observed at ~$4.45 at typing.
• Elsewhere, Libya’s El-Feel oilfield has resumed production after three months, with output announced at 40K bpd (against 70K bpd capacity). Note that the new NOC chairman last Friday declared that the country would return to pre-crisis output levels “within a week” (potentially returning >500K bpd to markets).