OIL FUTURES: Strong start to week for crude prices in view of tight products supply

Oil prices firmed in early Europe trading May 23 amid a tight market with low stocks, US fuel demand, and as Shanghai prepares to exit a two-month-long lockdown.

At 11:55 am BST, ICE July Brent crude futures was up $1.18/b on the day at $113.73/b while NYMEX July WTI rose $1.05/b to $111.35/b.

Products stocks are at low levels globally, with the US diesel stocks at a 17-year minimum while Amsterdam-Rotterdam-Antwerp inventories are lowest since 2008. Moreover, gasoline stocks across the Atlantic are at low levels too, just in time when the summer driving season gets underway.

On the demand side, the American Automobile Association forecast an 8% year-on-year increase in travel over the upcoming Memorial Day weekend.

Market participants welcomed a move in Shanghai that aims to make changes to a zero COVID-19 policy. A manufacturing giant and home to the world's largest cargo port, the city opened some public transport and issued return-to-office rules for bankers in its financial district. Other parts of the city, including central districts, though, saw tighter measures and it could take weeks before the megapolis returns to more normal life.

Additionally, Beijing reported 99 new cases May 22, hitting a record since the last outbreak and culling hopes that lockdown measures will be eased.

In the UK, the government is mulling whether to introduce a windfall tax on energy companies that have benefited from historically high crude prices to drive earnings up. The policy, proposed by opposition parties, aims to impose a one-off levy on oil and gas companies to help with the rising cost of living in the country.

"We are looking at the situation with real urgency and intent, and it is against that backdrop that people can be reassured the government is on the case," said Simon Clarke, the chief secretary to the Treasury, May 22.

The CBOE OVX index, an indicator of crude price volatility, was down on the day at 50.72%.

In the foreign exchange market, the euro was steady against the dollar at $1.067.