Oil futures edged lower Tuesday as investors weighed prospects for a European Union embargo of Russian crude and the hit to demand from China’s COVID lockdowns.
June natural-gas futures
rose 5.9% to $7.917 per million British thermal units.
Oil was buoyed in a choppy session on Monday as worries over the hit to crude demand from China’s COVID-19 lockdowns was later overshadowed by further indications the European Union was set to put in place an embargo on imports of Russian crude in response to the country’s invasion of Ukraine. Germany last week was seen dropping its opposition to such a move and officials have indicated that Europe’s largest economy is prepared to take steps to find alternate sources of energy in coming months.
Crude was also lifted by a surge higher for heating oil futures on Monday, which has found support as distillate inventories on both sides of the Atlantic have tightened.
An oil embargo “may seem simple, but the details are complicated and likely to cause problems figuring out how to wean off Russian oil without causing a massive oil price spike,” said Stephen Innes, managing partner, SPI Asset Management, in emailed comments.
“Fortunately, peak heating season is in the rear window, but that does not solve the issue of backfilling the Russian barrels’ loss, which suggests the E.U. will continue to stall, hoping U.S. shale production returns to pre-COVID level and OPEC catches up with quotas to at least mitigate some of the shortfalls,” he wrote.