(LONDON) Oil prices edged higher on Tuesday, buoyed by prospects of improving near-term demand in the United States and China, as the US government attempts to cap Russian crude prices.
Posted at 7:05 a.m.
Around 6:05 a.m., a barrel of Brent North Sea for August delivery rose 1.67% to 116.04 dollars.
A barrel of US West Texas Intermediate (WTI) for delivery in July, which is the last day of trading, took 2.30% to 112.08 dollars.
“After suffering a crushing blow […] due to fears of recession and destruction of fuel demand, oil prices are recovering,” commented Stephen Innes, analyst at Spi Asset Management.
According to analysts, fears about the global economy and the risks of recession have for the moment given way to those concerning the supply of crude.
Prospects of increased US and Chinese demand in the near term are pushing prices up, amid tight supply.
Stephen Innes noted a “success of mass testing in Shanghai”, which reinforces “the idea that China will pursue a gradual reopening”.
China is the last major global economy to maintain a zero COVID-19 strategy, but is gradually reopening its economy after massive lockdowns, relying on large-scale testing campaigns and local lockdowns.
In the United States, “before the midterm elections, the White House is debating the temporary suspension of the federal gasoline tax,” adds the analyst.
A decision that could improve the outlook for oil demand in the middle of the holiday season in the United States called “driving season”, during which the use of means of transport is increased, and therefore of fuel.
At the same time, “worries about supply in global markets are growing amid renewed efforts to prevent Russia from earning revenue from crude,” said Susannah Streeter, an analyst at Hargreaves Lansdown.
The United States is talking with its allies to further restrict Russia’s oil revenues by capping the price of its crude oil, US Treasury Secretary Janet Yellen said Monday during a visit to Canada.