Oil Heads for Longest Run of Monthly Gains Since Early 2018

Apr 29, 2022

(Bloomberg)

Oil is poised for a fifth monthly gain after another tumultuous period of trading that saw prices whipsawed by the fallout from Russia’s war in Ukraine and the resurgence of Covid-19 in China.

West Texas Intermediate futures climbed to trade near $106 a barrel on Friday and are about 6% higher in April. With the war entering a third month, Germany has signaled that it wouldn’t oppose a European Union embargo on Russian oil, but expressed skepticism that it’s the most effective means of damaging President Vladimir Putin.

China’s outbreak has added another source of volatility. The nation’s leaders pledged to boost economic stimulus to spur growth, but virus lockdowns have swelled oil stockpiles and put the world’s top crude importer on track for the biggest hit to demand since the early days of the pandemic.

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Oil poised to eke out another monthly gain as volatility grips market

“All eyes are on the European Union as it seemingly edges closer to imposing an outright ban on Russian oil imports,” said PVM Oil Associates analyst Stephen Brennock. “The upshot is that the global oil balance will tighten considerably over the summer period.”

As the path toward a potential embargo on Russian oil has grown clearer, the oil market’s structure has firmed. On Thursday, West Texas Intermediate was trading in its biggest backwardation — a structure that indicates tight supply — in a month.

Prices
WTI for June delivery climbed 1.3% to $106.68 a barrel on the New York Mercantile Exchange at 10:39 a.m. in London. Futures are up 6% this month. Brent for June settlement, which expires Friday, gained 1.9% to $109.63 on the ICE Futures Europe exchange. The more active July contract rose 1.6% to $108.94.

Oil has fluctuated around $100 a barrel throughout April and its fifth monthly gain will be the longest winning streak since January 2018. This month, the volatility since the outbreak of war has been compounded by a significant Covid-19 outbreak in China and a surging U.S. dollar, making commodities priced in the currency less attractive.

Meanwhile, diesel futures in New York jumped as much as 2.1% on Thursday to the highest level in data going back to 1986 ahead of the contract expiration on Friday. It’s become the world’s most in-demand fuel as buyers compete for supplies from U.S. Gulf Coast refiners, which have stepped up to plug the gap left by Russia.