Higher In Asia; WTI Holding Below Multi-Week Highs

WTI and Brent are ~$0.50 firmer apiece at writing to print $108.80 and $111.40 respectively, having risen above neutral levels to extend a move off of Thursday’s trough.

• To recap, WTI and Brent pared gains after hitting nine-week ($111.37) and three-week ($114.00) highs respectively on Thursday, both ultimately closing little changed on the day. Worry over stagflation and Dollar strength has continued to take centre stage against well-documented fears over disruptions to global supplies, with downward pressure from issues such as Chinese energy demand destruction receding as the country shows signs of bringing the current COVID outbreak under control.
• To elaborate on the latter, COVID cases in China have continued their steady downtrend, with officials in Shanghai declaring that community spread there has been “effectively contained”. The matter may bear watching however, with surveys of Japanese factories in Shanghai reportedly pointing to a majority still being shut, with those opening reporting reduced output as well. Cases in Beijing have continued edging upwards as well (count for May 5 stands at 72 vs 50 for May 4), coming as China’s Politburo doubled down on their COVID-Zero strategy on Thursday.
• Elsewhere, the U.S. govt fuelled some concern re: tight fuel supplies, announcing a plan to buy up to 60mn bbls of crude for strategic reserves by end-2022, with delivery to happen sometime “after FY23”. The move was tipped as part of an effort to replenish the planned 180mn bbl drawdown announced earlier this year, potentially paving the way for similar announcements in the future.