Crude Oil Mixed as Biden-Xi Call Yields No Clear Signals on War

By Geoffrey Smith — Crude oil prices were mixed in choppy trading on Friday, as a keenly-anticipated phone call between the presidents of the U.S. and China failed to give any clear developments on how the war in Ukraine can be stopped. 

The two sides’ early prepared statements kept themselves to generalities only, but more details are expected to dribble out from a call that lasted, in all, nearly two hours. 

China has repeatedly expressed concern at the impact of Western sanctions on Russia, which have squeezed energy prices higher and threaten to shave a full percentage point off world growth this year, according to the Organization for Economic Cooperation and Development. Such a large impact could have a disproportionately large impact on China, the world’s biggest exporter.

By 11:40 AM ET (1540 GMT), futures were up 0.4% at $103.36 a barrel, while , the international benchmark was down 0.3% at $106.31 a barrel.

U.S. were down 1.5% at $3.1680 a gallon. That’s now nearly 20% below the record high that they posted earlier in the month, but still well above the comfort zone for the U.S. economy, and a level that – if sustained – would continue to stoke inflation among a broader range of goods and services.

Biden has had limited success in generating international pressure on Russia as a result of its invasion. The political ties that it has developed in the Middle East during a decade of fighting in Syria and eight years of almost uninterrupted oil output coordination with OPEC have led to other key producers such as Saudi Arabia and the United Arab Emirates standing by their commitments to the so-called OPEC+ bloc, rather than pumping more oil to replace the Russian barrels kept off the world market by sanctions.

The UAE-based newspaper The National reported earlier that a planned visit to the Gulf by Secretary of State, scheduled for later this month, will now not take place. 

The sanctions effect remains in any case largely indirect, due to the fact that Russia’s energy exports are exempted from the measures imposed by the EU and U.S.  That has allowed other big importers such as India and China to work on expanding schemes aimed at circumventing the dollar-based financial system in order to keep supplies flowing. India’s imports from Russia have tripled in year-on-year terms this month, according to Kpler data cited by the Financial Times. 

Russia earlier said that its schedule for pipelines and ports that usually serve Western markets anticipates a small increase in exports in the second quarter compared to the first one. It’s not clear how firm the offtake for that crude will be, however.

Prices were also supported by signs that the winter wave of Covid continues to recede. Germany is set to lift most of its remaining restrictions from Monday, while local authorities also promised a quick relaxation of the measures imposed in Shenzhen, the Chinese manufacturing hub that is home to over 17 million people. China had canceled thousands of flights over the last week as outbreaks in Shenzhen and the northeastern province of Jilin led the authorities to impose the tightest restrictions on activity in two years – albeit not as strict as those seen at the start of the pandemic. 

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