However, the impact of China's severe Covid lockdowns worry analysts: File Image/Pixabay
The reality of strong global fuel demand on Friday outweighed persistent fears within the analytical community of demand destruction due to a host of factors, and the result was another session of price gains for oil and the fourth straight week of gains for the commodity.
West Texas Intermediate for June delivery settled up $1.02 at $113.23 per barrel, and WTI for July settled up 39 cents at $110.28; Brent for July settled up 51 cents at $112.55 per barrel.
For the week, WTI for July was up about 0.4 percent and Brent gained about 1 percent.
Rebecca Babin, CIBC Private Wealth Management
It could end up being a cruel summer for energy traders
Trading was influenced by U.S. energy firms this week adding oil and natural gas rigs for a ninth week in a row, according to Baker Hughes, and also by Auto club AAA stating that Americans continued to get behind the wheel even though gasoline prices hit a record $4.59 per gallon on Friday.
But Rebecca Babin, senior energy trader at CIBC Private Wealth Management, pointed out there is little logic governing crude trading of late: "There continues to be a disconnect between the risk financial markets associate with crude financial assets and the physical market that is trying to digest SPR releases to meet product demand.
"This dichotomy keeps markets fragmented and volatile - it could end up being a cruel summer for energy traders."
The biggest fear of traders apart from galloping inflation is China, who brutal Covid lockdown measures have caused economic chaos; and on Friday it was reported that Shanghai found the first cases of Covid-19 outside quarantine in six days, raising the question about whether the easing of the city's lockdown will be delayed.
However, Bloomberg on Friday reported that more trucks are on China's highways than a month ago (7.37 million compared to 7.19 million), while Shanghai's peak-hour traffic congestion has edged higher; but the news agency conceded that an ongoing virus outbreak in Beijing, a flareup in the auto hub of Tianjin, and a ballooning cluster in Sichuan "indicate the fragile demand recovery could easily be derailed."
Further volatility could result from China's ongoing effort to replenish its strategic crude stockpiles with cheap oil from Russia, something observers say is a clear sign of Beijing strengthening ties with Moscow at a time when the western world is divorcing itself economically from the former Soviet Union.
Meanwhile, analysts on Friday were optimistic that a long-planned initiative by the European Union to ban the import of oil from Russia will go ahead.
BCA Research said in a note, "Odds of an EU embargo being declared sooner rather than later increased in the wake of Germany's success in cutting Russian oil imports by more than half in a very short period," and the plan was said to also have been bolstered by new carve-outs for member states most dependent on Russian oil, such as Hungary.