Oil prices rose further in early Asian trade on Wednesday, as geopolitical tensions remained high, with Russia threatening gas supply cutbacks to Poland and Bulgaria, while optimism for Chinese economic stimulus boosted oil demand.
Brent crude futures increased $1.27 to $106.26 per barrel, up 1.2%. WTI crude futures in the United States climbed $1.11, or 1.1%, to $102.81 a barrel.
The market is pulled between supply and demand fears about Russian oil and gas disruptions and a worsening global economic outlook, thus crude prices finished roughly 3% higher on Tuesday in a tumultuous session.
In a huge escalation of Russia’s larger confrontation with the West over its invasion of Ukraine, which Moscow terms a “military operation,” Gazprom has informed Poland and Bulgaria that gas supplies will be cut off as of Wednesday.
On Tuesday, NYMEX ultra-low-sulfur diesel futures rose more than 9% to a new high of $4.47 a gallon.
The International Monetary Fund (IMF) cautioned on Tuesday that Asia faced a “stagflationary” outlook, citing the Ukraine conflict, rising commodity prices, and China’s slowdown as major concerns.
China’s central bank announced on Tuesday that it will increase cautious monetary policy support for the country’s economy as Beijing tries to contain a nascent COVID-19 outbreak in the capital and avoid the same crippling city-wide lockdown that has engulfed Shanghai for more than a month. Any stimulus would increase the demand for oil.
China’s domestic flight demand has risen, driving global airline capacity to its highest level in 2022 this week, according to travel data firm OAG, despite lengthy lockdowns in Asia’s largest aviation market.
In terms of supply, the US government will release statistics on crude stocks later on Wednesday. According to industry figures released on Tuesday, crude and distillate stocks in the United States increased last week, but gasoline inventories decreased.