Oil drops as US inflation data rises, China imposes lockdowns

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Oil prices fell on Friday, after U.S. consumer prices rose more than expected and China imposed new COVID-19 lockdown measures.

Oil prices fell on Friday, after U.S. consumer prices rose more than expected and China imposed new COVID-19 lockdown measures.

Brent crude fell $1.06 to settle at $122.01 a barrel. U.S. West Texas Intermediate crude fell 84 cents to settle at $120.67 a barrel.

Both benchmarks still posted weekly gains, 1.9% for Brent and 1.5% for WTI.

For the day, oil prices fell along with Wall Street stocks after news of an acceleration in US consumer prices in May. Gasoline prices hit record highs and food costs soared, leading to the biggest annual increase in about 40 years. This raises fears that the Federal Reserve will tighten policy more aggressively.

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“The concern is that this could be a predictor of consumption patterns and even though demand for gasoline is strong right now, it’s a sign going forward that if gasoline prices don’t stabilize, consumers will reduce,” said Phil Flynn, analyst at Futures Prices.

In another red flag for demand, Shanghai and Beijing returned to COVID alert on Thursday. Parts of Shanghai have imposed new lockdown restrictions and the city has announced a series of mass tests for millions of residents.

China’s crude oil imports in May were up nearly 12% from a year earlier, when they were weak.

“This does not indicate that demand for oil is increasing. Instead, China likely acted opportunistically, buying crude oil from Russia at a price significantly below the world market level in order to replenish its inventories.” , said Carsten Fritsch, analyst at Commerzbank. .

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Oil had risen more than $1 earlier in the session on fears of a potential supply disruption in Europe and Africa.

Norway’s oil production could be cut if workers go on strike on Sunday, the Norwegian Oil and Gas Association (NOG) said.

Some 845 of the roughly 7,500 offshore platform workers plan to strike from June 12 if annual wage talks fail.

Oil production from Libya’s Sarir field was curtailed after Ras Lanuf and Es Sider ports were closed and as a group threatened to close Hariga port, two oil engineers at the field said.

In U.S. supply, the number of U.S. oil rigs, an indication of future supply, rose by six to 580 this week, their highest level since March 2020.

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Prospects of striking a nuclear deal with Iran and lifting US sanctions on Iran’s energy sector are dim.

Iran dealt a near fatal blow to the chances of reviving the nuclear deal on Thursday by beginning to remove virtually all International Atomic Energy Agency monitoring equipment installed under the deal, said IAEA chief Rafael Grossi.

Fund managers reduced their net long positions in U.S. crude futures and options by 1,674 contracts to 284,171 in the week to June 7, the Commodity Futures Trading Commission (CFTC) said on Friday. .

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