Oil prices rose on Tuesday as investors fretted over tight global supply after Libya was forced to halt some exports and as factories in Shanghai prepared to reopen post a COVID-19 shutdown, easing some demand worries.
Brent crude futures rose 61 cents, or 0.5%, to $113.77 a barrel at 0349 GMT, while U.S. West Texas Intermediate (WTI) crude futures gained 33 cents, or 0.3%, to $108.54 a barrel.
Gains were limited with the dollar trading at a fresh two-year high. A stronger dollar hurts oil buyers holding other currencies.
Both benchmark contracts gained more than 1% in the previous session after hitting their highest since March 28 on political crisis in Libya. The country said it could not deliver oil from its biggest oil field and shut another field due to political protests.
“Outages in Libya deepened concern over tight global supply and the Ukraine crisis dragged on, offsetting concern over slowing Chinese demand,” said Ajay Kedia, director at energy consultancy Kedia Commodities.
The latest supply hit came just as fuel demand in China, the world’s largest oil importer, was expected to pick up as manufacturing plants prepared to reopen in Shanghai.
Although oil prices are still vulnerable to demand shocks as China continues to impose tough curbs to contain COVID outbreaks.
“For oil prices to take off on a sustainable trajectory, reopening mainland cities is necessary for translating into a sustainable economic rebound that supports oil demand,” SPI Asset Management’s managing director, Stephen Innes, said in a note.
The Libya outage highlights just how bullishly reactive oil markets have become to supply shocks, Innes added.
Meanwhile the possibility of a European Union ban on Russian oil for its invasion of Ukraine continues to keep the market on edge. On Tuesday Ukraine said Russia, which calls its actions a “special operation”, had started an anticipated new offensive in the east of the country.
“Market sentiment was supported by the Russian minister saying more countries banning Russian oil imports would mean oil prices exceeding historic highs,” ANZ Research analysts said in a note.