Oil rebounds on China demand concerns in see-saw trading

Oil prices rose modestly in volatile trading on Tuesday as the market weighed concerns over Russian supply and Chinese demand.

Brent crude futures were up 41 cents, or 0.4%, at $102.73 a barrel at 1117 GMT, while U.S. West Texas Intermediate contracts were up 18 cents, or 0.2%, at $98.72 per barrel.

Both contracts had settled down around 4% on Monday.

Demand concerns in China, the world’s largest crude oil importer, added downward pressure on Tuesday. China’s capital Beijing has expanded its COVID-19 mass testing to much of the city of nearly 22 million, as the population braced for an imminent lockdown similar to Shanghai’s stringent curbs. read more

But both oil contracts rose over $1 a barrel earlier in the session following a statement from the People’s Bank of China that it will step up monetary policy support to the real economy.

“I still expect more policy support, but not the flood-like policy deluge the markets have been hoping for, which could leave oil markets adrift over the short term, looking to the U.S. summer driving season and EU sanctions for support,” Stephen Innes of SPI Asset Management said in a note.

The prospect of supply tightness in the physical market related to the phasing out of Russian oil provided price support.

The parliamentary parties of Germany’s ruling coalition have called on the government to push ahead with a plan to phase out Russian oil and gas imports “as soon as possible”.

But analysts said the release of oil from emergency reserves had eased concerns over tight supply.

“Focus has shifted towards the demand side of the equation and worries about prolonged supply disruptions have greatly been mitigated by the release of 240 million bbls of SPR oil by IEA members and by the ostensible, albeit somewhat obscured, dealing in Russian oil,” said Tamas Varga of oil broker PVM.

Separately, in a bearish signal for oil markets, five analysts polled by Reuters estimated on average that U.S. crude inventories had increased by 2.2 million barrels in the week to April 22.

The poll was conducted ahead of the release of the inventory report from the American Petroleum Institute at 4:30 p.m. EDT (2030 GMT) on Tuesday. The official government Energy Information Administration data is due out on Wednesday.

Additional reporting by Mohi Narayan in New Delhi and Liz Hampton in Denver; Editing by Louise Heavens and Bernadette Baum

This article was originally published by Reuters.