• Oil prices are a little lower on Monday despite the weaker US dollar and stronger global equity markets.
• WTI remains within recent ranges near $110 as traders mull China Covid-19 and EU Russian oil embargo developments plus demand.

Oil prices stabilized within recent ranges on Monday amid a fairly quiet start to the week so far as crude oil relevant newsflow is concerned, with benchmarks broadly failing to benefit from a rally in global equities and a decline in the US dollar. As a risk-sensitive asset, strength in equities tends to help oil prices, while a weaker US dollar increases demand for USD-denominated commodities (like oil), as it makes it cheaper for the holders of international currency.

Front-month WTI futures were last pivoting on either side of the $110 level, midway between last week’s highs in the $115 area and lows in the $105 area. At current levels near $109.50, WTI is down about $1.0 on the day, which is a small intra-day move by WTI standards. Oil traders remain focused on familiar themes, including the Covid-19 lockdown situation in China. According to China’s NHC, the overall situation in the country is improving, though Beijing reported a record number of infections on Sunday. Lockdowns across many of the country’s largest cities, including Shanghai and Beijing, have dented Chinese crude oil demand in recent weeks, a tailwind for crude oil prices.

Elsewhere, analysts also noted strength in the US market for gasoline as the nation approaches its peak driving season, as reflected by US refineries ramping up output, as supportive for crude oil prices on Monday. According to analysts at Reuters, the peak driving season in the US lasts from the end of May (Memorial Day weekend) until September (Labor Day).

Whilst there have been fears that the surge in gasoline prices since the 2021 peak driving season might dent demand this year, analysts have over the last few weeks been citing high-frequency US mobility data as showing that this has thus far not been the case. A report from the Federal Highways Agency last week showed that vehicle miles traveled hit a record high for April this year, and high-frequency data from TomTom and Google show traffic climbing over the last few weeks.

Looking ahead, analysts will remain on the lookout for any headlines about whether the EU is getting any closer to a deal on ending Russian oil imports. The latest reports from Bloomberg suggest this isn't the case. That could act as another headwind making it more difficult for WTI to return to/break above last week’s $115ish highs. For now, though, robust demand (outside of China) and weak supply (as output from Russia/smaller OPEC nations struggles) should keep prices underpinned above last week’s $105ish lows, with the 21 and 50-Day Moving Averages in the mid-$100s also lending support.