OIL FUTURES: Crude rebounds after sharp drop amid China demand concerns

Crude oil futures rose moderately in mid-morning Asian trade April 26 to recoup some losses after China lockdowns and a surging US dollar sent crude prices lower at the start of the week.

At 10:42 am Singapore time (0242 GMT), the ICE June Brent futures contract was up 85 cents/b (0.83%) from the previous close at $103.17/b, while the NYMEX June light sweet crude contract rose 63 cents/b (0.63%) to $99.17/b.

"A rebound with risk appetite and overdone concerns about demand destruction helped oil pare losses," Edward Moya, senior market analyst at OANDA, said in a note on April 26.

Chinese authorities on April 24 tightened restrictions in parts of Shanghai, including erecting fences around apartment buildings with COVID-19 infected individuals.

Similarly, authorities in Beijing have ordered 3.5 million residents and workers in the biggest district of Chaoyang to report for three coronavirus tests this week to stem a surge in cases, according to media reports.

"COVID worries in China weighed heavily on oil prices yesterday ... the key for the market is how the situation in Beijing develops in the coming days and week," Warren Patterson, head of commodities strategy at ING, said in an April 26 note.

Patterson noted that the potential EU ban on Russian oil remains the key upside risk for oil markets. "While it is looking more likely that we will ultimately see a ban, the uncertainty is how quickly a ban will be introduced," he said.

On the supply side, production from shuttered fields in Libya will resume "in the coming days," the country's oil and gas minister Mohamed Oun said in a statement April 24.

"Supply fears are not the primary focus for energy traders and now you have a surging dollar that is adding extra pressure across all commodities. The oil market could easily become very tight if China shows they are close to reversing their stance on lockdowns, but right now that doesn't seem to be happening anytime soon," Moya added.

Meanwhile, Dubai crude swaps and intermonth spreads were lower in mid-morning trade in Asia April 26 from the previous close.

The June Dubai swap was pegged at $97.50/b at 10 am Singapore time (0200 GMT), down 33 cents/b (0.3%) from the April 25 Asian market close.

The May-June Dubai swap intermonth spread was pegged at $1.64/b at 10 am Singapore time, down 44 cents/b over the same period, and the June-July intermonth spread was pegged at $1.41/b, down 25 cents/b.

The June Brent-Dubai EFS was pegged at $5.31/b, down 67 cents/b.