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Oil slides as China lockdowns outweigh proposed EU Russia oil ban
Global Banking & Finance Review®
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By Nia Williams
(Reuters) -Oil prices fell by more than 2% on Tuesday as demand worries stemming from China’s prolonged COVID-19 lockdowns outweighed the prospect of a European embargo on Russian crude.
Beijing is mass-testing residents to avert a lockdown similar to Shanghai’s over the past month. The capital’s restaurants were closed for dining in while some apartment blocks were sealed shut.
Brent crude settled down $2.61, or 2.4%, at $104.97 a barrel. U.S. West Texas Intermediate (WTI) crude was down $2.76, or 2.6%, at $102.41.
“There are real concerns about whether Chinese demand, which is a huge factor in global demand, will remain strong in 2022,” said Gary Cunningham, director at Tradition Energy.
Prices remain high, however, with Brent crude having reached $139 in March for its highest since 2008 after Russia’s invasion of Ukraine exacerbated supply concerns that were already driving a rally.
The European Union is working on a sixth round of sanctions against Russia, with officials saying that European Commission President Ursula von der Leyen is expected to spell out the plans on Wednesday, including a ban on imports of Russian oil by the end of this year.
Phil Flynn, an analyst at Price Futures group, said price action is likely to remain volatile as traders weigh the impact of China’s lockdowns against the West’s oil sanctions and ahead of a U.S. Federal Reserve meeting on Wednesday.
“We have a market that’s in flux and reacting from headline to headline in a very choppy trading range,” Flynn said.
Also in focus will be the latest round of U.S. inventory and supply reports. Five analysts polled by Reuters on average expect U.S. crude inventories fell by 1.2 million barrels last week. [EIA/S]
The American Petroleum Institute industry group issues its inventory report at 4:30 p.m. EDT, followed by government figures from the Energy Information Administration on Wednesday. [API/S]
(Additional reporting by Alex Lawler and Sonali PaulEditing by David Gregorio and David Goodman)
Brent crude is a major trading classification of crude oil originating from the North Sea. It serves as a benchmark for oil prices globally and is used to price two-thirds of the world's oil.
West Texas Intermediate (WTI) is a grade of crude oil used as a benchmark in oil pricing. It is sourced from North America and is known for its high quality and low sulfur content.
U.S. crude inventories refer to the stock of crude oil stored in the United States. These inventories are monitored to gauge supply and demand dynamics in the oil market.
A Federal Reserve meeting is a gathering of the Federal Open Market Committee (FOMC) to discuss and set monetary policy, including interest rates and economic outlook.
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