WTI holds above $119.00 despite China’s renewed lockdown concerns

WTI crude, futures on NYMEX, holds above $119.00 and faces a minor time correction after a vertical upside move. Crude oil is enjoying its gains despite the renewed concerns of another lockdown in China to contain the spread of the Covid-19.

The Chinese economy was recovering from lockdown measures in Shanghai and Beijing after a two-month lockdown period. Covid-linked controls on the execution of various economic activities were getting the traction again, however, the discovery of new cases raised questions over the China’s zero Covid-19 policy.

No doubt, the restrictive measures in the Chinese economy will trim the demand anticipations but the broader upside in the oil prices will remain intact. The oil shortage due to the embargo on oil imports from Russia will not get offset sooner. Investors have started considering the fact that the imbalance in the demand-supply mechanism after a prohibition of oil from Moscow will persist longer.

The restrictions on oil imports from Russia have forced many refineries worldwide to shut down their operations after its invasion of Ukraine. Availability of less capacity due to less number of operating refineries will keep the oil bulls’ momentum intact. The oil prices are set to recapture their all-time-high levels at $126.35.

Meanwhile, the rising demand for crude oil to manufacture gasoline due to peak summer in the US economy will keep the requirement for oil at elevated levels.