Lower Amidst Possible Shanghai Lockdown Redux

WTI and Brent deal $0.80 weaker apiece at typing, edging away from session lows after breaking under Thursday’s worst levels earlier despite a lack of obvious headline catalysts. The move lower has mostly unwound gains made following Wednesday’s U.S. EIA oil inventory data release - which had pointed to tightness in crude supplies.

• To recap Thursday’s price action, WTI and Brent extended a pullback from mid-week highs to close ~$0.50 lower, with some downward pressure from an uptick in the USD (DXY) to its own three-week highs. WTI is nonetheless on track to record a seventh straight week of gains (sixth in seven weeks for Brent).
• The outlook for Chinese energy demand has again begun a descent into uncertainty, seeing crude benchmarks operate off recent highs. Shanghai authorities on Thursday announced mass testing to begin on Saturday, with the earmarked ~15mn residents to be under “closed-off management” until testing ends. Fresh COVID cases for the city remains low at 11 reported for Thursday, although six of those cases were found outside of quarantined areas - a key metric that officials have cited in past decisions re: lockdowns.
• A note that Beijing on Thursday closed entertainment venues in the Chaoyang and Dongcheng districts on COVID concerns, with the city today reporting eight cases for June 9.
• Commentary surrounding the EIA’s mid-week report has pointed out that demand for gasoline in the U.S. remains high despite higher pump prices, weighing against earlier expectations for demand destruction amidst the U.S. “summer driving season”.
• An S&P Platts survey released on Thursday has pointed to OPEC+ collectively increasing output by 120K bpd in May, with the group’s shortfall in production from current output quotas topping out at 2.616mn bpd - largely corroborating earlier remarks from the UAE’s energy minister.
• Elsewhere, hope surrounding Iranian nuclear talks have taken a sharp turn southwards as Iran has removed 27 cameras used by the UN’s IAEA to monitor nuclear sites (albeit in supposed retaliation for the agency’s recent resolution condemning the country), with IAEA chief Rafael Grossi calling it a “fatal blow” to a nuclear deal.