Oil Settles Close to Unchanged; Recession Fears Compete With Expectations of Rising Demand

Oil prices were little changed on Monday, settling only marginally higher as concerns about a future recession competed with an anticipation for stronger fuel demand with the forthcoming U.S. summer driving season and Shanghai's preparations to reopen following a two-month coronavirus lockdown.

WTI crude closed up 1 cent, or 0.01 percent, at $110.29 per barrel, while Brent crude futures settled up 87 cents, or 0.7 percent, at $113.42 per barrel.

According to Bob Yawger, director of energy futures at Mizuho, "dark clouds are forming around the financial markets, and this has begun to affect crude oil."

"The economic health of the global economy is currently uncertain," he continued.

Multiple dangers to the global economy topped the concerns of the wealthy at the annual Davos economic forum, with some highlighting the possibility of a global recession.

Kristalina Georgieva, managing director of the International Monetary Fund, stated that she did not anticipate a recession for big economies but could not rule one out.

Oil's declines were mitigated by forecasts that gasoline demand would remain elevated. The peak driving season in the United States was expected to begin on Memorial Day weekend at the end of this week.

Analysts reported that mobility data from Tom and Google (NASDAQ:GOOGL) has increased in recent weeks, indicating more drivers on the road in locations such as the United States, despite concerns that rising fuel prices could dampen demand.

An administration official stated that the White House is considering declaring a state of emergency in order to release diesel from a stockpile that is infrequently utilized in order to alleviate a severe supply shortage and stem the rise in costs.

The White House is contemplating utilizing the Northeast Home Heating Oil Reserve, which was established in 2000 to assist with supply shortages and was only utilized once in 2012 in the aftermath of Hurricane Sandy. The impact of such a discharge would be limited due to the reserve's modest size, which stores only 1 million barrels of diesel.

The inability of the European Union to get a definitive agreement on an embargo on Russian oil following Russia's invasion of Ukraine, which Moscow refers to as a "special operation," has curbed oil price increases. Hungary continues to oppose the proposed prohibition, assuring that there will be no unexpected supply disruption.

According to Jeffrey Halley, a senior market analyst at OANDA, the chronic shortage of refined petroleum products in the United States and the ever-present Ukraine/Russia danger supported prices.

Shanghai, China's economic capital, hopes to return to normal on June 1 as coronavirus cases fall.

Lockdowns in China, the world's largest oil importer, have crippled industrial output and construction, forcing measures to bolster the economy, including a larger-than-anticipated reduction in mortgage rates on Friday.

Monday's cabinet statement was cited by state television as saying that China would take targeted measures to help its economy, including expanding tax credit rebates and launching new investment projects.