Oil rises in early trading

Oil prices rose in early trading on Monday as US fuel demand, tight supplies and a slight decline in the dollar supported the market as Shanghai prepared to reopen after a two-month shutdown, raising concerns about a sharp slowdown in growth.

Brent crude futures rose 82 cents to $113.37 a barrel by 0126 GMT, while US West Texas Intermediate crude futures rose 69 cents, or 0.6 percent, to $110.97 a barrel, adding to last week’s small gains for both contracts.

“Oil prices are being supported as gasoline markets remain tight amid strong demand heading into peak US driving season,” said Stephen Innes, managing partner at SBI Asset Management.

“Refineries are usually in a ramp-up mode to meet the huge needs of American drivers at gas stations,” he added.

Peak driving season in the United States traditionally begins on Memorial Day weekend at the end of May and ends on Labor Day in September.

Analysts said that despite concerns about higher fuel prices potentially slashing demand, mobility data from TomTom and Google have surged in recent weeks, showing that more people have been on the roads in places like the United States.

“High-frequency data suggests demand continues to grow,” ANZ analysts said in a note.

The decline in the US dollar also sent oil prices higher on Monday, as it made crude oil cheaper for buyers holding other currencies.

However, market gains were capped by concerns about China’s efforts to combat the Covid pandemic through lockdowns, even as Shanghai reopened on June 1.

The shutdown in China, the world’s largest oil importer, has hit industrial production and construction, prompting steps to support the economy, including a larger-than-expected mortgage rate cut last Friday.

The inability of the European Union to reach a final agreement on a Russian oil embargo for the invasion of Ukraine, which Moscow calls a “special operation”, has also prevented oil prices from rising much further.