Shanghai Will End Lockdown, Crude Oil Prices Soar Through 114 US Dollars

JAKARTA, KOMPAS.com – Price oil raw The world surged at the end of trading Monday (16/5/2022) driven by optimism for a significant recovery in demand from China, after positive signs that the Covid-19 pandemic was starting to recede in the country.

Collect CNBC, Tuesday (17/5/2022), crude oil prices Brent futures rose 2.4 percent to as low as 114.24 dollars a barrel. Temporary oil prices US West Texas Intermediate (WTI) crude rose 3.4 percent to as low as 114.20 US dollars per barrel.

Shanghai will open its territory and end the lockdown starting June 1, 2022. This policy was taken after Shanghai said 15 of the 16 districts in its territory had eliminated Covid-19 cases outside the quarantine area.

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Shanghai is a central business city with about 25 million people and accounts for about 4 percent of China’s oil consumption. The city of Shanghai has implemented a lockdown since the end of March 2022.

“We’re seeing a lot of signals that demand (crude oil) will start back in the region, supporting higher prices,” said Bob Yawger, director of energy futures at Mizuho.

However, it is estimated that there are still 46 cities in China that are still implementing the lockdown, so that in some cities public spending, factory production, and energy use will still be depressed.

On the other hand, movement crude oil prices The world was also affected by the price of US gasoline futures which reached an all-time high on Monday. This was due to a decline in stock which triggered supply concerns.

Gasoline prices in the US hit $4 per gallon (1 gallon is about 3.7 liters) for the first time, while the national average retail price rose to a new record.

“Oil prices will remain bullish, especially the short-term WTI contracts, as US gasoline prices continue to rise amid weaker imports of oil products from Europe,” said Kazuhiko Saito, chief analyst at Fujitomi Securities.

The strengthening of world crude oil prices was also influenced by diplomats and European Union officials who expressed optimism about reaching an agreement on a gradual embargo of Russian oil despite concerns about supplies in eastern Europe.

The European Union plans to phase out imports of crude oil from Russia within 6 months, while imports of refined petroleum products by the end of 2022.

On Monday, Austrian Foreign Minister Alexander Schallenberg said he expected the European Union to agree to sanctions in the coming days. Likewise, German Foreign Minister Annalena Baerbock said the bloc needed a few more days to find a deal.

“With the planned EU ban on Russian oil and the slow pace of OPEC production increases, oil prices are expected to remain at their current level of near 110 dollars per barrel,” said Naohiro Niimura, Partner Market Risk Advisory.

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