Oil prices went down at the start of this week as concerns over a resurgence of COVID-19 infections in China fed on demand outlook in the global market.
China is the world’s largest importer of crude. Prolonged lockdowns in the country led to West Texas Intermediate futures sliding 3% to hit below the price of $100 per barrel.
Beijing is on strict lockdown while more deaths are being reported in Shangai, with China headed for the worst oil demand cut down since the early days of the pandemic outbreak more than three years ago.
Jitters in the global oil market have been made worse by the Russian-Ukraine conflict, which has led to a spike in inflation.
The European Union is already toying with cutting Russian oil imports, a factor that could limit supply and push up global prices.
China has imposed stiff lockdowns in a number of its cities in a bid to reverse the tide of rising daily infection rates. For instance, Shanghai is entering its fourth week of strict lockdown.
According to sources, China’s demand for gasoline, diesel, and aviation fuel in April is expected to slide 20% from a year earlier.
This is equivalent to a drop in world crude oil consumption of 1.2 million barrels a day.
Brent for June settlement dropped 2.9% to $103.57 on the ICE Futures Europe exchange after losing 1.6% last Friday.
The market is poised for additional supply, adding to bearish signs.
Libya is expected to resume output from shuttered fields in the coming days. Further, the CPC oil terminal on Russia’s Black Sea coast has resumed regular operations after one of two moorings damaged in a storm was repaired.
Brent remains in a bullish structure where near-dated contracts are more expensive than later-dated ones but has narrowed considerably since early March.
The prompt timespread for the benchmark was 50 cents a barrel in backwardation, compared with a high of $4.64 on March 2.
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