Oil trades trades higher Tuesday morning CEST despite recession concerns as well as new Covid-19 restrictions in China that could reduce fuel demand.

“Discussion within the oil complex still revolves around Libya’s decline in production, China continuing to impose measures to slow the spread of Covid, and concerns around global recession woes driving demand destruction,” says Stephen Innes, managing partner at SPI Asset Management, to Reuters.

A barrel of European reference oil Brent trades Tuesday morning for USD 121.97 against USD 119.25 Monday afternoon. US benchmark crude West Texas Intermediate sells concurrently for USD 120.68 against USD 117.80.

Supply is tightened by a decrease in Libyan exports, while other members of the Organization of Petroleum Exporting Countries and OPEC+ allies struggle to hit production quotas while Russian oil is under embargo due to the Ukraine war.

ANZ Research reports Libyan Oil Minister Mohamed Aoun saying that domestic output has fallen to 100,000 barrels per day from 1.2 million bpd year-on-year.

Regarding demand, traders are watching China, where a Covid-19 outbreak traced to a bar has stocked fears about a new lockdown phase just as restrictions are eased elsewhere in the country.

“For now the perceived tightness in oil supply is lending resilience to oil prices,” writes Commonwealth Bank Commodities Analyst Tobin Gorey, writes the news agency.

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New Covid-19 cases in Beijing lower oil prices

Lockdown in Shanghai dampens oil prices