Supply Worry Creeps In As Chinese COVID Cases Fall, EU Sanctions Eyed

WTI and Brent are ~$1.00 firmer apiece, operating a little above Tuesday’s worst levels at typing. Both benchmarks have caught a minor bid as worry re: tight global supply remains evident, with prior concern re: demand destruction in China continuing to ease from extremes seen earlier in April.

• To elaborate on the latter, fresh COVID case counts in China have continued to decline, although lockdowns in parts of Shanghai look set to continue as community transmission persists (authorities are looking at zero community transmission before lifting lockdowns). Elsewhere, authorities in Beijing escalated pandemic control measures slightly on Wednesday, shutting 40 subway stations (~10% of the city’s network) concentrated around the Chaoyang district (previously flagged epicentre of Beijing’s outbreak so far).
• A BBG survey has pointed to OPEC increasing output by ~10K bpd in April amidst supply woes in Libya and Nigeria, compounding well-documented sentiment re: the group’s inability to meet monthly target production increases (noting that a similar survey for Mar pointed to a 90K bpd increase for that month).
• The latest round of U.S. API inventory estimates crossed late on Tuesday, with source reports pointing to a larger-than-expected drawdown in crude inventories and a decline in gasoline and distillate stockpiles, while a build in Cushing hub stocks was observed. Up next, U.S. EIA inventory data crosses at 1430 GMT, with WSJ estimates calling for declines in crude, gasoline, and distillate inventories.
• Looking ahead, the European Commission is expected to propose a sixth round of sanctions on Russia later on Wednesday, with potential details on embargoes of Russian crude imports.