Oil up despite low China demand over COVID-19 lockdowns

Oil prices edged higher on Tuesday following sharp price fluctuations in previous trade with the ongoing war in Ukraine, and despite sustained COVID-19 lockdowns in China and a rise in the US dollar index.

International benchmark Brent crude was trading at $102.51 per barrel at 0719 GMT for a 0.34% increase after closing the previous session at $102.16 a barrel. American benchmark West Texas Intermediate (WTI) was at $98.56 per barrel at the same time.

While supply fears lingering from the Russia-Ukraine war, containment measures due to increasing COVID-19 cases in Shanghai, the largest city in China and one of the most important financial and trade centers in Asia, raised demand fears in the world’s second-largest, oil-consuming country to further exert downward price pressure.

Following increased cases, the Chinese capital Beijing also began mass testing for millions of residents. Over the weekend, Beijing reported 41 cases, the largest number so far in its recent spike.

Fears over the economic impact of China's COVID-19 lockdowns and the aggressive pace of US rate hikes saw investors retreat, sending the dollar to a two-year high against other currencies to pressure crude oil prices that are indexed to the US dollar.

The dollar index, which measures the value of the American dollar against a basket of currencies, including the Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, was at 101.70 on Tuesday, after rising 0.58% on Monday to a two-year high of 101.86.