OIL FUTURES: Crude rises on China's financial stimulus, renewed supply fears

Crude oil futures climbed in mid-morning Asian trade April 27, extending overnight gains, as China announced a fresh wave of financial stimulus, which helped delay demand concerns, while renewed fears over supply disruptions resurfaced as Russia is expected to halt gas to Poland.

At 11:20 am Singapore time (0320 GMT), the ICE June Brent futures contract was up $1.04/b (0.99%) from the previous close at $106.03/b, while the NYMEX June light sweet crude contract rose 62 cents/b (0.61%) to $102.32/b.

"Oil traders are putting Beijing lockdown fears in the rearview mirror and instead are focusing on more stimulus coming from China," Phil Flynn, an analyst at Price Futures Group, said.

According to media reports, the People's Bank of China announced late April 26 that it would "step up the prudent monetary policy's support to the real economy, especially for industries and small businesses hit hard by the pandemic."

"More stimulus from China could mean more oil demand and that is a sign of hope in a market that has been concerned about slowing demand not only in China but around the world," Flynn said.

In an April 27 note, OANDA's senior market analyst Edward Moya said, "Earlier crude prices got a boost after China's PBOC stepped up efforts to calm markets and as energy traders await China's mass COVID testing results, which could lead to even more lockdowns."

Meanwhile, Russia is expected to completely suspend gas supplies to Poland and Bulgaria April 27, after both countries received notification from Russian gas supplier Gazprom on April 26, S&P Global Commodity Insights reported earlier.

Russian gas supplies to Poland under the long-term contract between state-controlled PGNiG and Gazprom Export are to be completely suspended from April 27 after the Polish company refused to settle its bills in rubles, PGNiG said April 26.

Russian President Vladimir Putin had signed a new decree March 31 requiring EU buyers to pay in rubles for Russian gas via a new currency conversion mechanism or risk having supplies suspended.

"With Russia's move to cut off gas flows to Poland and Bulgaria in its threat for fuel payment in rubles, it puts other European countries in the crosshair as well, and the potential scenario of a worsening energy supply-demand imbalance brings back the narrative of persistent inflation," Yeap Jun Rong, market strategist at IG, said in a note on April 27.

"The oil market has priced in enough demand destruction from China and crude prices should start to find strong support around the $100 level," Moya added.

Dubai crude swaps and intermonth spreads were lower in mid-morning trade in Asia April 27 from the previous close.

The June Dubai swap was pegged at $100.46/b at 10 am Singapore time (0200 GMT), up $3.82/b (3.95%) from the April 26 Asian market close.

The May-June Dubai swap intermonth spread was pegged at $1.76/b at 10 am Singapore time, up 17 cents/b over the same period, while the June-July intermonth spread was pegged at $1.66/b, up 34 cents/b.

The June Brent-Dubai EFS was pegged at $5.59/b, up 45 cents/b.