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WTI crude futures fell more than 1% to around $109 per barrel on Monday as investors took profits following strong gains from late last week, while weak economic data in China weighed on sentiment. The US oil benchmark rallied more than 10% off a recent low last week on lingering supply concerns, prompting investors this week to take some bets off the table. Markets also turned cautious early on Monday after China reported disappointing economic numbers as a result of Covid restrictions, highlighting concerns of a demand slowdown from the world’s top crude importer. Meanwhile, European diplomats said Friday the EU still aims to agree to a phased embargo on Russian oil this month despite pushback from certain member countries, rejecting suggestions of a delay or watering down of proposals. An OPEC monthly report also showed output in April rose by 153,000 barrels per day, lagging the 254,000 bdp rise that the group allowed under a deal.

US natural gas futures regained ground and consolidated around the $8/MMBtu mark, not far from an almost 14-year peak of $9 touched earlier this month, as investors continued to monitor the outlook for US LNG exports against a backdrop of tight domestic supplies. The Kremlin sanctioned Gazprom Germania, a former Gazprom subsidiary now in control of German regulators, and the Polish grid operator who controls natural gas transits between Belarus and Germany through the Yamal-Europe pipeline. Additionally, Ukraine has shut down one of its two entry points, further pushing the EU to rely more on US LNG cargoes for its supplies. Domestically, EIA data showed utilities injected a smaller-than-estimated 76 bcf into storage in the week ending May 6th, below the 5-year average build of 82 bcf. Gas production in crucial locales in the US has slowed in 2022 due to insufficient pipeline capacity, while lousy weather also cut production and boosted demand.

Gasoline futures broke above $4 a gallon for the first time ever in the third week of May, amid tight supplies and reducing stockpiles. Refining capacity in the US is still lower than pre-pandemic levels, which has constrained supplies in a market that has faced a sharp rebound in demand. Also, EIA data showed gasoline stocks shrank more than double what analysts estimated amid a 3.6 million barrel draw, putting current storage levels below the low range of the 5-year average. This has been reflected at the pump, with American consumers paying a record $4.43 per gallon at the end of last week, according to the AAA.

Heating oil futures traded below $4 a gallon, but remained not far from record levels seen at above $4.3 in March as traders assessed downside risks to oil demand and tight supplies. According to the EIA, domestic inventories of distillate fuels, which include heating oil and substitutes, shrank for the fifth time in a row in the week ending May 6th. Current levels are the lowest in 17 years, as refining capacity remained below pre-pandemic levels, and higher domestic and overseas demand drained stocks. Additionally, prospects that the EU could soon approve a Russian oil embargo strengthened the outlook for US heating oil exports.

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