(Bloomberg) — Oil erased earlier gains as traders weighed hawkish comments from U.S. Federal Reserve officials and China’s promise to repair the economic damage caused by a spate of lockdowns.
Global benchmark Brent traded below $112 a barrel after four days of gains. The bullish run in crude and other commodities are fanning inflation, and Federal Reserve Bank of St. Louis President James Bullard said on Monday that the U.S. central bank shouldn’t rule out rate increases of 75 basis points. Equity markets also opened lower after the Easter holiday.
The impact of the pandemic on China’s economy is short term and normal conditions will be “rapidly restored” after the current outbreak is contained, a spokesperson for the top economic planner said on Tuesday. That came a day after the central bank moved to aid individuals and small businesses.
Meanwhile, production problems in Libya are adding further bullish sentiment to an already tight market. The nation’s oil output has fallen by more than half a million barrels a day and there’s a risk of further losses as a wave of political demonstrations engulfs the OPEC member. The Sharara field in the west of the country, which can pump 300,000 barrels a day, has been closed as protests spread.
Oil has advanced more than 40% this year as Russia’s invasion of Ukraine upended an already-tight market. The crisis is rerouting global crude flows, with the U.S. and U.K. moving to ban the import of Russian barrels, while some Asian buyers take extra cargoes. At the same time as the war drags on, there’s mounting pressure on the European Union to also curb its imports.
“Suffice to say, this latest disruption will add to concerns over the already tight supply backdrop,” Stephen Brennock an analyst at PVM Oil Associates said of the outages in Libya. “That said, China’s economy has slowed of late following the reintroduction of lockdowns.”
French Finance Minister Bruno Le Maire said on Tuesday that it’s necessary “more than ever” to stop oil imports from Russia, reflecting the debate within the energy-dependent bloc about the merits of restricting flows. France hoped to convince EU partners “in coming weeks,” Le Maire told Europe 1 radio.
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