International oil prices are under pressure, macro fabrics curb demand, but supply stability faces new challenges

On Friday (May 20), international oil prices were slightly under pressure, as investors worried that weak global economic growth and the central bank's tightening monetary policy may curb the recovery of fuel demand. But global supply tensions continued unabated, with refinery explosions in South Korea bolstering already tight gasoline supplies in Asia.

At 16:52 GMT+8, NYMEX crude oil futures fell 0.25% to $109.61 a barrel; ICE Brent crude futures fell 0.09% to $111.94 a barrel.


The International Monetary Fund (IMF) has urged Asian economies to be mindful of spillover risks from monetary tightening. While BOJ policy runs counter to the global monetary tightening shift, central banks in the US, UK and Australia have all raised interest rates recently.

IMF Deputy Managing Director Kenji Okamura said Asian economies faced a choice between supporting growth with more stimulus and exiting stimulus to stabilize debt inflation. The coronavirus pandemic, the war in Ukraine and tightening global financial conditions will make this year "challenging" for Asia.

Crude oil gains were limited this week, with Brent and NYMEX maintaining a range-bound pattern due to uncertain demand paths. Investors have been reducing exposure to riskier assets, worried about rising inflation and more aggressive central bank action.

U.S. stocks ended lower overnight as investors worried about rising inflation and interest rates. “If U.S. growth data continues to deteriorate, oil prices could follow equities into a negative feedback loop,” Stephen Innes, managing director of SPI Asset Management, said in a client note.

But energy supply tensions continue unabated. South Korea's third-largest refinery S-Oil has halted production at its Onsan refinery's No. 2 alkylation unit due to an explosion. An explosion on Thursday night killed one person and the shutdown is expected to hit already strained gasoline supplies in Asia. S-Oil is a major exporter in Asia.

Citi analysts expect S-Oil's gasoline production to be "severely affected" in the near term, although it may buy alkylate to maintain output. It could take up to two years to replace a unit that caught fire, during which time S-Oil can export ultra-low sulphur fuel oil.

Gasoline and diesel prices hit record highs again on Thursday, the AAA said. The U.S. House of Representatives has passed a bill that would allow the president to issue an energy emergency declaration that would make it illegal for companies to raise the price of gasoline and household fuel excessively.