By Adedapo Adesanya
Crude oil inched lower on Thursday in a jittery trade as parts of Shanghai returned to COVID lockdowns just a week after reopening as it recorded fresh cases of the virus.
This sent the price of the Brent crude lower by 0.7 per cent or 86 cents to $122.21 per barrel and slipped the United States West Texas Intermediate (WTI) by 0.6 per cent or 79 cents to $120.72 per barrel.
The Chinese city of Shanghai, which is the Asian country’s largest economic hub, also announced a round of mass testing for millions of residents.
Particularly for traders, news of the lockdown of Shanghai’s Minhang district, home to more than 2 million people, renewed bearish sentiments.
The most populous district in the Chinese capital of Beijing also announced the shutdown of entertainment venues.
Parts of Shanghai and Beijing returning to lockdown measures spooked the market that the expected oil demand recovery may not materialize as soon as projected.
China’s zero-COVID policy with immediate partial lockdowns to break the chains of transmission and mass testing for millions of residents will further trouble the market.
This news overshadowed another drop in US gasoline inventories and strong fuel demand globally despite record-high prices.
It also outweighed news of China’s May exports jumping almost 17 per cent from a year earlier as easing COVID curbs allowed some factories to restart. It was the fastest growth since January this year and more than double analysts’ expectations.
Oil prices were previously up after the Energy Information Administration (EIA) reported a small crude build and gasoline draw on Wednesday.
Total motor gasoline inventories decreased by 800,000 barrels last week and are now about 10 per cent below the five-year average for this time of year, the EIA said.
At 416.8 million barrels, U.S. crude oil inventories are about 15 per cent below the five-year average for this time of year.
Even with the development, oil prices traded close to their three-month high as strong demand for fuels around the world with the start of the driving season capped price losses.
Analysts noted that despite record high prices at the pumps, US motorists are showing signs of driving with demand rising above 9 million barrels a day for the first time this year.