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Title: Oil firms on tight supply as U.S. driving season looms

May 23, 2022 03:06AM ET

By: AnalysisWatch

Oil prices rose on Monday on fuel demand in the US, tight supply and a slight weakening of the US dollar, supporting the market as Shanghai prepares to reopen after a two-month shutdown sparked fears of a sharp slowdown.

Brent crude futures were up 97 cents to $113.52 a barrel as of 0651 GMT, while US West Texas Intermediate crude futures were up 80 cents, or 0.73%, to $111.08 a barrel, adding to the small gains in both contracts last week.

According to SPI Asset Management managing partner Stephen Innes, oil prices are supported as gasoline markets remain tight amid strong demand ahead of the peak driving season in the US.

The peak of the US driving season traditionally begins in late May on Memorial Day and ends in September on Labor Day.

Analysts said that despite concerns about rising fuel prices that could reduce demand, mobility data from TomTom and Google (NASDAQ:GOOGL) have been rising in recent weeks, showing that more people are taking to the roads in places like the US.

A weaker US dollar also boosted oil prices on Monday as it makes the commodity cheaper for buyers holding other currencies.

However, market gains were tempered by fears that China is trying to suppress COVID-19 with shop closures, even though Shanghai is due to reopen on June 1.

Blockages in China, the world's biggest oil importer, have hit industrial production and construction, prompting measures to support the economy, including a larger-than-expected mortgage rate cut last Friday

ANZ analysts said the COVID-19 warehouse closures are a temporary factor reducing demand in China, although elsewhere demand is holding up well.

The European Union's failure to reach a final agreement to ban Russian oil for its invasion of Ukraine, which Moscow calls a "special operation", has also prevented oil prices from rising much higher.

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