Oil prices inched lower early on Thursday in jittery trade as parts of Shanghai returned to COVID lockdowns just a week after reopening, overshadowing another drop in U.S. gasoline inventories and strong fuel demand globally despite record-high prices.
As of 10:43 a.m. EST, WTI Crude was down 0.19% at $121.86, and the international benchmark, Brent Crude, traded down by 0.02% at $123.56.
Oil prices were up in earlier trade on Thursday after the Energy Information Administration (EIA) reported a small crude build and a gasoline draw on Wednesday. Total motor gasoline inventories decreased by 800,000 barrels last week and are now about 10% below the five-year average for this time of year, the EIA said. At 416.8 million barrels, U.S. crude oil inventories are about 15% below the five-year average for this time of year.
Later on Thursday, however, oil prices traded up and down for most of the morning ET, after parts of Shanghai and Beijing in China returned to lockdown measures, spooking the market that the expected oil demand recovery in the world’s top crude oil importer may not materialize as soon as projected. China’s zero-COVID policy with immediate partial lockdowns to break the chains of transmission and mass testing for millions of residents returned to haunt the market.
Yet, oil prices traded close to their three-month high as strong demand for fuels around the world with the start of the driving season capped price losses.
“Crude oil inventories at Cushing, the delivery hub for WTI crude oil futures dropped to a three-month low while gasoline inventories are at their lowest seasonal level since 2014, just ahead of the peak summer demand season,” Saxo Bank said in its Thursday market commentary, referring to the EIA report from Wednesday.
“Despite record high prices at the pumps, US motorists are showing no signs of leaving their cars in the garage with demand rising above 9 million barrels a day for the first time this year,” the bank’s strategy team wrote.
By Tsvetana Paraskova for Oilprice.com