Oil Mixed, Libyan Supplies Halted as China Prepares to Restart Production

By Gina Lee – Oil was mixed on Tuesday morning in Asia, with a sudden fall in Libyan supplies adding to concerns about a tight market. Investors also continue to monitor supplies in China, as the city of Shanghai slowly prepares to restart production.

Brent oil futures inched up 0.10% to $113.27 by 1:30 AM ET (5:30 AM GMT) while WTI futures edged down 0.13% to $107.47. A strengthening dollar, trading at a two-year high, also capped gains for the black liquid.

Both Brent and WTI benchmark contracts gained more than 1% during the previous session after hitting their highest since Mar. 28. A fresh political crisis in Libya, with the country saying it could not deliver oil from its biggest oil field and shutting another field down due to political protests.

“Outages in Libya deepened concern over tight global supply and the Ukraine crisis dragged on, offsetting concern over slowing Chinese demand,” Kedia Commodities director Ajay Kedia told Reuters.

The situation in Libya comes as fuel demand in China, the second-biggest importer of oil globally, is expected to recover as the city of Shanghai slowly prepares to re-open manufacturing plants. However, with COVID-19 lockdowns still in place in the country, oil prices remain vulnerable to demand shocks.

“For oil prices to take off on a sustainable trajectory, reopening mainland cities is necessary for translating into a sustainable economic rebound that supports oil demand,” SPI Asset Management’s managing director Stephen Innes said in a note.

The Libya outage highlights just how bullishly reactive oil markets have become to supply shocks, he added.

Meanwhile, markets remain on edge due to the possibility of a European Union ban on Russian oil due to the war in Ukraine. In the latest development in the war, precipitated by the Russian invasion of Ukraine on Feb. 24, Russia has reportedly launched a new offensive in the eastern Ukrainian region of Donbas.

“Market sentiment was supported by the Russian minister saying more countries banning Russian oil imports would mean oil prices exceeding historic highs,” ANZ Research analysts said in a note.

Investors now await U.S. crude oil supply from the American Petroleum Institute, due later in the day.

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