WTI and Brent are ~$1.60 weaker at typing, operating a touch above Wednesday’s trough at typing. Both benchmarks have come under pressure as the USD (DXY) continues to trade a little below 5-year highs made on Wednesday in the NY session, while debate re: the trajectory of China’s current COVID outbreak has done the rounds in Asia.
- To elaborate, fresh reported COVID cases in Shanghai have declined for a fifth day to ~10.7K, the lowest in over three weeks. The outbreak however continues to spread to other key population hubs, with the city of Hangzhou (home to several Chinese large-caps) implementing a mass testing regime and Beijing reporting the limited suspension of in-person classes. A note that this comes as other areas such as the port cities of Qingdao and Qinhuangdao have been reportedly placed under full/partial lockdown.
- Keeping within the region, Sinopec has issued a forecast that crude demand in China would recover by end-Q2 in ‘22, led by predictions of “pent-up demand” once COVID case numbers recede.
- Looking to the U.S., EIA inventory data on Wednesday offered a relatively mixed picture, with figures pointing to a build in crude and Cushing hub inventories, with a surprise drawdown in gasoline stocks and a decline in distillate stockpiles observed as well.
- WTI and Brent futures largely rose off their session lows after the EIA data release, with events in China (re: demand destruction worry) Europe (re: possible sanctions on Russian crude and the cutting of Russian gas supplies to Europe) returning into focus.