OIL FUTURES: Crude rallies above $100/b as OPEC warns on Russia sanctions, easing China lockdowns

Crude futures settled above the $100/b level April 12 as the market eyed rising supply risks and signs of a return of lockdown-stunted Chinese crude demand.

NYMEX May WTI settled $6.31 higher at $100.60/b, while ICE June Brent rallied $6.16 to $104.64/b.

OPEC Secretary General Mohammed Barkindo warned EU representatives that the producer group would be unable to compensate for a loss of Russian barrels should the union decide to embargo Russian oil imports, estimating a resultant loss of 7 million b/d.

While Russian crudes flows are currently healthier than expected, EU officials have been unable to reach consensus on any embargo, although the measure remains a possibility. The slight easing of coronavirus lockdowns in Shanghai have also elevated the possibility of renewed market tightness.

NYMEX May RBOB settled up 15.07 cents at $3.1538/gal, and May ULSD climbed 19.67 cents to $3.4644/gal.

"There is still plenty of uncertainty over how supply will evolve in the weeks and months ahead. Clearly, this will be largely dependent on what happens on the ground in Ukraine. An escalation could push the EU towards banning Russian oil, which would potentially see a significant tightening in the market," ING analysts Warren Patterson and Wenyu Yao said.

International Energy Agency member nations plan to release 120 million barrels of oil from storage to ease supply fears, the largest release in IEA history. The IEA announcement came on the heels of a US pledge in late April to release up to 180 million barrels of crude from the nation's strategic petroleum reserve. Together these pledges drove crude prices down around $14/b from late March, sending front-month Brent to settle April 11 below $100/b for the first time since March 16. However, the market may now be looking beyond these releases, analysts said.

"$100 oil is back and it is probably going to stay. The crude correction ended now that the market has mostly priced in the strategic petroleum release plan, China is beginning to lift some of their lockdowns and as negotiations between Russia and Ukraine appear to have hit a dead-end," OANDA senior market analyst Ed Moya said in a note. "The energy market expects to remain very tight from the summer and if geopolitical risks remain elevated, $100 oil should easily hold."

China has relaxed some lockdown measures in Shanghai, allowing low-risk areas more movement. New COVID-19 infections in Shanghai continue to hover near record highs with 994 symptomatic cases and 22,348 asymptomatic cases as of April 11, the local government said on its official WeChat account April 12.

Oil demand markers in most of the world's biggest oil-consuming countries edged higher in the week ended April 8, according to mobility data, despite concerns over China's efforts to halt a coronavirus outbreak in some of its major cities.

Mobility in 13 countries, representing about half of global oil demand, averaged 6.9% below precoronavirus levels in the most recent week, according to adjusted Google data, compared with 7.4% below from the week before and up from a seasonal low of 25% below on Jan. 6. The data, which does not include China, shows regional mobility in Asia has recovered to its highest level since Dec. 30, 2021.