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Crude rally stalls amid fresh lockdowns, stronger dollar

Highlights

China lockdowns spread amid fresh COVID-19 outbreaks

US, Europe gasoline cracks retreat

US dollar hits three-week high

New York — The crude price rally stumbled Jan. 11, with futures settling mostly lower amid fresh pandemic demand growth concerns following the imposition of new lockdowns in Asia.

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NYMEX February WTI settled up 1 cent at $52.25/b, while ICE March Brent finished down 33 cents at $55.66/b.

A fresh outbreak of coronavirus infections in Hebei province, near Beijing, has led to lockdowns in provincial capital Shijiazhuang and Xingtai, China's National Health Commission said Jan. 8, adding the epidemiological origin of the outbreak has not been identified. Residents have been barred from leaving, and public transport has been halted.

On Jan. 11, the NHC reported 103 new cases of infections in China, the highest daily rise since late July, with 82 out of the 85 local cases from Hebei.

"The rally with oil was getting out of hand and prices needed to pullback as the uncertainty over short-term crude demand remains elevated," OANDA senior market analyst Edward Moya said in a note. "Chinese crude demand has been a bright spot for the oil market, but that could quickly end if China steadily sees new clusters."

NYMEX February ULSD settled down 60 points at $1.5735/gal, and February RBBO was down 2.15 cents at $1.5208/gal.

Pandemic-related demand concerns weighed on gasoline cracks. The ICE New York Harbor RBOB crack against Brent edged down to $8.28/b in afternoon trading, retreating from more than five-month highs reach Jan. 8.

The Platts northwest Europe gasoline Eurobob crack against Brent fell back to $3.15/b, down from a 10-week high Jan. 8.

Total US gasoline inventories are expected to have climbed 3.2 million barrels higher in the week ended Jan. 8, analysts surveyed by S&P Global Platts said Jan. 11, putting stocks at around 244.3 million barrels.

US driving activity edged 0.2% higher in the week ended Jan. 8, according to Apple mobility data, remaining near levels last seen in late May and likely portending a weaker-than-normal post-holiday demand rebound. The five-year average of US Energy Information Administration data shows implied demand for gasoline is up around 2% in early January, as workers return from the end-of-year holiday.

Recent economic data also suggests that a second wave of pandemic lockdowns in the US is impacting labor markets fast than anticipated, likely weighing further on gasoline demand. December non-farm payrolls contracted by 140,000 jobs, US Bureau of Labor Statistics data showed Jan. 8, below market expectations of a slight increase in jobs.

A rising US dollar added to oil price headwinds. The ICE US Dollar Index rallied up to 90.48 in afternoon trading, on pace for the strongest close since Dec. 22.