Crude oil futures inched lower in mid-morning Asian trade April 29 as China's lockdown continued to weigh on crude sentiment despite fears of supply disruptions from a potential embargo on Russian oil.
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At 11:00 am Singapore time (0300 GMT), the ICE June Brent futures contract was down 13 cents /b (0.12%) from the previous close at $107.46/b, while the NYMEX June light sweet crude contract fell 31 cents/b (0.29%) at $105.05/b.
On April 28, Beijing began closing down schools, entertainment outlets and tourist sites and carried out mass testing on its capital's 22 million residents to avert a Shanghai-like lockdown, according to media outlets.
Asia's oil demand outlook for 2022 is starting to look dimmer than a couple of months ago as China's strict COVID-19 lockdowns overshadowed signs of increased consumption emerging from the rest of Asia, according to S&P Global Commodity Insights.
"Based on our latest April outlook, China's growth will be flat this year, after growing by 550,000 b/d in 2021," Lim Jit Yang, adviser for Asia-Pacific oil markets at S&P Global, said.
S&P Global's Platts Analytics has revised down Asia's oil demand growth forecast for 2022 to 716,000 b/d from the previous forecast of 1.08 million b/d, mainly due to China's consumption woes.
On the supply side, a Russian oil embargo by the EU is expected by the market on reports that Germany has dropped its opposition.
Germany had been a staunch opponent of a full Russian energy embargo. However, in recent days, comments from the country's economy minister, Robert Habeck, indicated a shift in its stance.
"Investors are concerned about replacing the lost barrels due to the upcoming European sanctions," ANZ Research team stated in a note on April 29.
"Oil product prices are rallying as well, lifting refiners' margins. However, oil-product demand remains subdued in China due to rising COVID case number," according to the note.
Dubai crude swaps and intermonth spreads were higher in mid-morning trade in Asia April 29 from the previous close.
The June Dubai swap was pegged at $101.60/b at 11 am Singapore time (0300 GMT), up $2.20/b (2.21%) from the April 28 Asian market close.
The May-June Dubai swap intermonth spread was pegged at $1.97/b at 11 am SGT, up 14 cents/b over the same period, and the June-July intermonth spread was pegged at $2.06/b, up 49 cents/b.
The June Brent-Dubai EFS was pegged at $5.86/b, up 28 cents/b.