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Little Changed In Asia After Monday’s Rally; Chinese COVID Cases Rise Further

OIL

WTI and Brent are ~$0.20 worse off apiece, operating a little shy of their respective best levels made on Monday. Crude has struggled to make headway above neutral levels in Asia as China has reported 699 COVID cases for Mon (highest since May 22), stoking simmering fears re: reduced Chinese energy demand owing to pandemic control measures.

  • To elaborate, Shanghai is carrying out mass testing in 12 of the city’s 16 districts, with daily cases continuing to be reported in the low double-digits. China’s current outbreak epicentre has shifted steadily from the east to Guangxi (south) and Gansu (northwest), with the latter’s provincial capital locked down for the past week thus far.
  • To recap Monday’s price action, WTI reclaimed the $100 handle after both benchmarks closed ~$5 higher, catching a bid as no concrete measures re: crude production increases were forthcoming from the Saudis after U.S. Pres Biden’s visit, unwinding some of the sell-off in crude observed since the meeting was confirmed in June.
  • Worry re: tightness in global supplies again takes centre stage, with Brent’s prompt spread sitting at ~$4.40 (against ~$3.95 observed during yesterday’s Asian session), operating around its highest levels observed for ‘22 so far.
  • The Keystone pipeline running from Canada to the U.S. is operating at a “reduced rate” (usual capacity ~590K bpd) due to damage to a power supply facility, with operator TC Energy declaring force majeure, and offering no timeline for its restoration at writing.

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