Shanghai Lockdowns Dent Demand Outlook For Oil

The benchmarks fell over 5% last week because of concerns about demand.

"Bearish mood overshadowed concerns about global supply constraints as China maintained Shanghai lockdowns and investors braced for a succession of US rate hikes," said Hiroyuki Kikukawa, general manager of research at Nissan (OTC:NSANY) Securities.

Investors are attempting to rebalance their positions ahead of the start of the summer driving season in the United States later this month, he added.

"However, oil prices are unlikely to fall below $90 per barrel due to the likelihood of a European Union ban on Russian oil in the face of a worsening Ukraine conflict," he said.

Shanghai authorities, battling a COVID-19 epidemic, have constructed fences around residential structures, igniting new public outrage over a lockdown that has confined a large portion of the city's 25 million residents indoors.

Jerome Powell, chairman of the US Federal Reserve, has hinted that a half-point increase in interest rates "will be on the table" when the Fed meets in May to approve the next in a series of hikes this year.

On the supply side, US energy companies added oil and natural gas rigs for the fifth consecutive week, despite high prices and government pushing.

In Europe, three individuals familiar with the port loading plan told Reuters on Friday that the Russia-Kazakh Caspian Pipeline Consortium (CPC) would resume full exports on April 22 following nearly 30 days of outages due to repairs to one of its key loading facilities.

Nonetheless, some analysts believe that the deepening crisis in Ukraine may increase pressure on the EU to punish Russian oil, resulting in a price increase later this year.

Russia is Europe's largest supplier of natural gas and the world's second largest exporter of crude oil after Saudi Arabia.

Morgan Stanley (NYSE:MS) increased its third-quarter Brent pricing projection by $10 per barrel to $130, citing a "larger shortfall" this year as a result of reduced supply from Russia and Iran, which is anticipated to outweigh short-term demand challenges.