Oil prices fall on China lockdowns, U.S. inflation

An aerial view shows oil stockpiling facilities in unidentified location, South Korea, in this handout picture taken on July 14, 2005. Picture taken on July 14, 2005. Korea National Oil Corp/Handout via REUTERS/File Photo

LONDON, June 10 (Reuters) – Oil slipped on Friday as China imposed new COVID-19 lockdown measures and U.S. consumer prices rose more than expected, but crude prices remained on track for another weekly gain due to solid demand for fuels in the United States.

Brent crude was down 90 cents, or 0.7%, at $122.17 a barrel at 1333 GMT and U.S. West Texas Intermediate crude fell 84 cents, or 0.7%, to $120.67 a barrel.

With prices overall rallying in the past two months, Brent was on track for a fourth consecutive weekly gain and WTI was set for a seventh straight weekly increase.

“Oil has continued retreating in Asia, driven by China slowdown fears after widened COVID mass testing was announced for Shanghai this weekend,” said Jeffrey Halley, a senior market analyst at OANDA.

Shanghai and Beijing went back on COVID alert on Thursday. Parts of Shanghai imposed new lockdown restrictions and the city announced a round of mass testing for millions of residents. read more

China’s crude oil imports in May were up nearly 12% from a year earlier, when they were low. read more

“This does not indicate that oil demand is picking up. Instead, China is likely to have acted opportunistically, buying crude oil from Russia at a significantly lower price than the global market level in order to replenish its stocks,” Commerzbank analyst Carsten Fritsch said.

Prices also came under pressure after U.S. Labor Department’s consumer price index (CPI) report.

U.S. consumer prices accelerated in May as gasoline prices hit a record high and the cost of services rose further, suggesting that the Federal Reserve could continue interest rate hikes to combat inflation. read more

Peak summer fuel demand in the United States has pushed gasoline to nearly $5 a gallon.

“The summer driving season in the U.S. is seeing record surges in gasoline and diesel consumption,” analysts at Fitch Solutions said.

Oil prices found support and rose more than $1 earlier in the session from fears of a potential disruption in supplies in Europe and Africa.

Norway’s oil output could be reduced if workers go on strike on Sunday, the Norwegian Oil and Gas Association (NOG) said. read more

Some 845 of roughly 7,500 employees on offshore platforms plan to strike from June 12 if annual pay negotiations with employers fail.

Oil output at Libya’s Sarir field has also been reduced after the ports of Ras Lanuf and Es Sider were closed and as a group threatened to close Hariga port, two oil engineers at the field said. read more

The prospect of reaching a nuclear deal with Iran and the lifting of U.S. sanctions on the Iranian energy sector also seemed to be receding, supporting the oil rally.

Iran on Thursday dealt a near-fatal blow to chances of reviving the nuclear deal as it began removing essentially all the International Atomic Energy Agency monitoring equipment installed under the deal, IAEA chief Rafael Grossi said. read more

“A strategic détente between the United States and Iran would allow 1 million barrels per day of Iranian crude oil exports to return to global markets and would therefore provide some relief to global oil prices,” analysts at BCA Research said.

Reporting by Bozorgmehr Sharafedin in London, additional reporting by Yuka Obayashi in Tokyo and Koustav Samanta in Singapore; editing by Jason Neely and David Evans

Our Standards: The Thomson Reuters Trust Principles.