SINGAPORE: Oil rebounded as traders weighed a warning from Vitol Group that prices had sunk too far against a virus outbreak in China and prospects for more strategic crude releases.
West Texas Intermediate erased losses early in the session to climb back above US$100 barrel.This was after it collapsed 13% last week for the biggest weekly decline in two years.Vitol, the world’s biggest independent crude trader, said at the weekend that prices had fallen to levels that didn’t reflect risks.
These risks included disruptions to Russian exports as the war in Ukraine drags on.
Investors will also get a clearer insight into the perspective of the Organization of the Petroleum Exporting Countries and its allies or Opec+ heavyweight Saudi Arabia in the coming days when Saudi Aramco releases official selling prices for May-loading cargoes.
A survey of traders and refiners suggested pricing of its key Arab Light grade to Asia may rise to a record.This is because some buyers are seeking alternatives to Russian crude due to the conflict in Ukraine.
The United States benchmark took a heavy beating last week after the Biden administration announced a massive release of crude from strategic reserves to combat energy prices that have been buoyed by Russia’s invasion of Ukraine.
Allies within the International Energy Agency will also tap stockpiles.Details are expected this week, according to reports.After the US move, Goldman Sachs Group Inc pared price forecasts while remaining broadly positive on oil’s outlook.
Still, China is this week grappling with a renewed coronavirus outbreak that’s hurting oil consumption.
Shanghai’s 25 million residents are almost all under some form of lockdown.This came as the country added more than 13,000 daily infections, with state media reporting a case infected with a new subtype.
Oil markets remain in backwardation, a bullish pattern, although differentials have narrowed.
Brent’s prompt spread – the gap between its two nearest contracts – was US$1.50 barrel in backwardation, from US$2.99 a week ago.