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Oil settles up on distillate strength, supply concerns

Commodities May 02, 2022 03:51PM ET
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© Reuters. Storage tanks are seen at Marathon Petroleum's Los Angeles Refinery, which processes domestic & imported crude oil into California Air Resources Board (CARB), gasoline, diesel fuel, and other petroleum products, in Carson, California, U.S., March 11, 2022

By Laura Sanicola

NEW YORK (Reuters) - Oil prices reversed course to settle in positive territory on Monday on a rally in the diesel market and fears that supply might be crimped by a potential European Union ban on Russian crude.

Brent crude futures gained 44 cents, or 0.4%, to settle at $107.58 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose 48 cents to settle at $105.17 a barrel.

Diesel futures continued to rally after rolling over to the June contract on Monday, rising 5% to $4.0172 per gallon as a low supply of inventories globally put pressure on WTI and Brent prices.

"The main item was a further strengthening in the diesel market that acted to pull the rest of the complex higher," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

Both benchmarks fell by more than $2.00 earlier in the session on news that the European Commission may spare Hungary and Slovakia from a Russian oil embargo as it prepares to finalize its next batch of sanctions on Russia on Tuesday.

The EU is leaning toward banning Russian oil imports by the end of the year, according to two EU diplomats, after talks between the European Commission and EU member states over the weekend.

Hungary will not vote for any measures prepared by the European Union that could endanger the security of its oil or gas supply, Foreign Minister Peter Szijjarto said, reiterating the country's position on Monday to RTL television.

Around half of Russia's 4.7 million barrels per day (bpd) of crude exports go to the EU, supplying about a quarter of the bloc's oil imports in 2020.

On the demand side, U.S. factory activity grew at its slowest pace in nearly two years in April, according to a survey from the Institute for Supply Management (ISM) on Monday. The ISM's index of national factory activity fell to a reading of 55.4 last month, which is still considered to be a mark of expansion.

"U.S. economic data still indicated expansion in the manufacturing sector, far from a recessionary number," said Phil Flynn, market analyst at Price Futures Group in Chicago.

Markets in Japan, Britain, India and across Southeast Asia were closed for public holidays on Monday.

China released data on Saturday showing that factory activity in the world's second-largest economy contracted for a second straight month to its lowest level since February 2020 because of COVID-19 pandemic-related lockdowns.

"A slowing to that extent, when China is already suffering from a property bust and worries about its (until recently) increased regulation, is potentially a major issue for commodity markets and the world economy," Tobin Gorey, a Commonwealth Bank commodities analyst, said in a note.

(This story corrects Brent settlement price in paragraph 2)

Oil settles up on distillate strength, supply concerns
 

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Comments (6)
Alan Rice
Alan Rice May 02, 2022 12:16PM ET
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EU : Still without a clue.
Millennial Stacker
Millennial Stacker May 02, 2022 9:02AM ET
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The USA and Europe have lost relevance and respect on the world stage. It’s china’s turn to lead.
James Wills
James Wills May 02, 2022 9:02AM ET
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In housing crashes? They're really trying to reach GFC standards there.
Mike ND
Mike ND May 02, 2022 9:02AM ET
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Chinas bubble keeps getting bigger it will pop sooner than later.
Lion King
Lion King May 02, 2022 8:25AM ET
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commodity are expensive coz the USD is just an A4 paper with colors. printing massive USD last few years break the dollar system and now we all pay for that
Sara Harter
Sara Harter May 02, 2022 5:11AM ET
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Sara Harter
Sara Harter May 02, 2022 4:46AM ET
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Thanks
Ulysses Lim
Ulysses Lim May 02, 2022 1:59AM ET
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Not to mention the U.S. Economy is officialy in a #Recession as 1st Qtr GDP Contracted by 3%. Another reason that $100 oil is not sustainable. This rally needs to be sold. #Trade at your own risk.
Erski Gumby
SB20 May 02, 2022 1:59AM ET
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George Williams reported as spam. lol
 
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