Title: Oil slips on China demand worries while EU weighs Russia oil ban

May 03, 2022 03:40AM ET

By: AnalysisWatch

Oil prices slipped Tuesday in a second day of thin trading in Asia, pulled in the opposite direction by China's COVID-19 freeze, which could weigh on fuel demand and prospects for a supply slump from a possible European oil embargo on Russia.

In trading thinned by holidays in China, Japan, and parts of Southeast Asia, Brent crude futures fell 23 cents, or 0.2%, to $107.35 a barrel at 01:32 AM ET, erasing earlier gains for the day.

US West Texas Intermediate (WTI) crude futures fell 24 cents, or 0.2%, to $104.94 a barrel, after earlier hitting an intraday high of $105.80.

Both benchmark contracts were up more than 40 cents on Monday and extended those gains slightly in early trading Tuesday.

The European Commission is expected to finalize work Tuesday on a sixth package of European Union (EU) sanctions against Russia over its actions in Ukraine, which would include a ban on purchases of Russian oil.

Two EU officials said Monday that the embargo could spare Hungary and Slovakia, both of which rely heavily on Russian crude.

Tight supplies of fuel products are boosting demand for crude, which helped push Brent and WTI up more than 40 cents Monday after a volatile session.

Traders will be watching U.S. inventory data closely. The industry body, the American Petroleum Institute, will report inventories for the week ended April 29 on Tuesday, followed by government data from the Energy Information Administration on Wednesday.

On average, five analysts polled by Reuters expected U.S. crude inventories to fall by 1.2 million barrels in the week ending April 29.

They also predicted that stocks of distillates, which include diesel and heating oil, would fall by 1.2 million barrels, while gasoline inventories would fall by 300,000 barrels.