Oil falls as China’s COVID-19 outbreak threatens demand outlook


Potential demand hit by China’s lockdowns is currently a major threat to the oil market, analysts warn.

Through Bloomberg

Oil fell at the start of the week on concerns that a widening Covid-19 outbreak in China will further affect consumption.

West Texas Intermediate futures fell as much as 6.7%, falling below the key $100 level on Monday. Rising coronavirus cases in Beijing sparked jitters over an unprecedented shutdown for the capital, as Shanghai saw a record number of daily deaths over the weekend. reported. The world’s largest crude oil importer is heading for the worst oil demand shock since the early days of the pandemic.

China’s trials of Covid-19 add another source of volatility to an oil market ravaged by Russia’s invasion of Ukraine. The war has fueled inflation and the European Union discusses measures to limit oil imports from Russia, in line with US and UK measures

Potential destruction of demand from Chinese lockdowns “is the main problem in the market right now,” said Bob Yawger, director of the futures division at Mizuho Securities USA. Demand has fallen 1.2 million barrels a day since the lockdowns began in Shanghai, and a shutdown of the capital could impact demand even more, he added.

WTI dips below key mark as China lockdowns fuel demand for concern

China has implemented lockdowns in a number of cities as it pursues a Covid Zero strategy. In Beijing, the government has expanded testing to 12 districts from April 26 to 30. As risks to consumption escalate, money managers are the least optimistic about WTI since April 2020, when prices turned negative. According to Bloomberg data, Chinese oil demand averaged 13.3 million barrels per day in March.

Prices for June delivery fell $5.28 to $96.79 a barrel at 1:09 p.m. in New York. Brent before the June settlement fell $5.85 to $100.80 a barrel.

The US oil benchmark remains about 35% higher this year, despite recent weakness. The market is poised for additional supply, contributing to bearish signals. Libya is expected to resume production from closed fields in the coming days, while the CPC oil terminal on Russia’s Black Sea coast has resumed regular operations after one of its two berths damaged in a storm was repaired.

Related news:

  • Asian oil refineries are avoiding a major export quality from the Russian Far East because of sanctions against a tanker company that ships the cargoes.
  • The Libyan oil ministry said fields closed by protesters could reopen within days, potentially allowing the OPEC member to return to full production.
  • Commodity markets line up for a pivotal week as a cascade of revenue from the industry’s biggest names arrives just as China’s deeper Covid-19 crisis sparks fresh turmoil, banning palm oil exports from Indonesia threatens accelerating food inflation and the war in Ukraine drags on.

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