Crude oil futures stabilized on Tuesday, climbing back above $100 per barrel. Investors had been abandoning energy commodities over the last week on China’s COVID-19 outbreak, ignoring many other developments that could affect global supplies.
May West Texas Intermediate (WTI) crude oil futures advanced $1.46, or 1.47%, to $100.00 a barrel at 13:36 GMT on Tuesday on the New York Mercantile Exchange. Crude prices have slumped 5% over the last month, but they are still up 33% year-to-date.
Brent, the international benchmark for oil prices, had touched $104 in overnight trading. June Brent crude futures surged $1.51, or 1.48%, to $103.70 a barrel on London’s ICE Futures exchange. Over the last week, the Brent contract has dropped nearly 4%, lifting its year-to-date rally to above 33%.
After sliding to as low as $93 a barrel, energy prices have rebounded, with investors returning to the chief commodity on the amplified supply-demand imbalance in global energy markets.
Investors are worried that China could reinstitute many coronavirus-related lockdown measures throughout the country. Most of Shanghai, for example, is already facing fresh public health restrictions to mitigate the spread of COVID.
This has ignited demand concerns from one of the world’s biggest energy consumers, which could also impact the world’s second-largest economy at a time when stagnation worries were prevalent.
But do bears have a case in this volatile environment?
“On the side of the bears is the slowdown of economic growth in China, the threat of a fall in consumption due to the expanding lockdowns, and the risk that Beijing may also soon be closed,” said Alex Kuptsikevich, FxPro senior market analyst, in a note.
“If oil gets fixed under 93.50, like in the case of gold before, we might see a relatively quick surrender of the bull speculators, which would take the price back to $82.50-%85.00, the area of October peaks and the 200-day moving average.”
In other industry news, President Joe Biden and his administration reversed his predecessor’s decision to allow oil and gas drilling in the Arctic. This prevents any oil and gas leases that could have added more supply to a country facing intense inflation.
In other energy commodities, May natural gas futures rallied $0.26, or 3.9%, to $6.929 per million British thermal units (Btu). May gasoline futures added $0.0518, or 1.64%, to $3.2734 a gallon. May heating oil futures rose $0.0513, or 1.4%, to $3.7054 per gallon.