Oil Rebounds After Two Days of Losses in Volatile Trade, According to Reuters

By David Gaffen

NEW YORK – Oil prices experienced a rebound after two days of declines in a volatile trading session on Thursday. The increase was supported by a weakening dollar and hopes that China might ease some lockdown restrictions, potentially boosting demand.

Crude oil benchmarks exhibited significant fluctuations, with both Brent and U.S. crude rising nearly $5 a barrel within a few hours, offsetting earlier losses in the week.

"The market has been extremely volatile," stated Andrew Lipow, president of Lipow Oil Associates in Houston. "The market is reacting to all sorts of different headlines hour to hour, and the daily movement in oil markets is becoming even more exaggerated."

Futures for July crude settled at $112.04, up by $2.93 a barrel, or 2.7%. Meanwhile, West Texas Intermediate (WTI) crude futures for June closed at $112.21 a barrel, a gain of $2.62, or 2.4%.

Investors in China are keenly observing plans to lift coronavirus restrictions starting June 1 in Shanghai, the country’s largest city, which could lead to increased oil demand from the world’s leading crude importer.

The oil market’s recovery was further aided by a drop in the dollar, which fell by 1% on the day following recent gains. Oil prices typically move inversely to the value of the dollar since most global crude transactions are conducted in that currency; thus, a stronger dollar makes crude more expensive for major importers.

However, any gains in crude prices have been tempered, with both Brent and U.S. benchmarks trading within a limited range due to uncertainty surrounding demand. Investor concerns about rising inflation and more aggressive central bank measures have led to a reduction in exposure to riskier assets.

"Brent seems pinned above $100, but I believe the risks of recession and uncertainties regarding Chinese demand are limiting upside potential and will continue to do so," commented Bill Farren-Price, head of oil and gas macro research at Enverus in London.

Additionally, the potential for a European Union ban on Russian oil imports has been providing price support. The EU has proposed a new package of sanctions against Russia in response to its invasion of Ukraine, which Russia refers to as a "special military operation." This proposed package includes a complete ban on oil imports within six months, although the measures have yet to be officially adopted, with Hungary expressing significant opposition.