Oil prices fell more than $2 a barrel on Monday, following a second straight weekly decline after global consumers announced plans to release a record volume of crude and petroleum products from strategic stocks and as lockdowns in China continued.
Brent crude was down $2.32, or 2.3%, at $100.46 a barrel at 0427 GMT, while US West Texas Intermediate crude was down $2.37, or 2, 4%, to $95.89. Last week, Brent fell 1.5% while US oil slipped 1%. For several weeks now, benchmarks have been at their most volatile since June 2020.
The market has been watching developments in China, where authorities have kept Shanghai, a city of 26 million, locked down under its “zero tolerance” policy for COVID-19.
China is the largest oil importer in the world.
Concerns over China’s growth were the main reason for oil prices tumbling today, with Shanghai’s lockdown showing no signs of lifting and Guangzhou looking to start mass virus testing, Jeffrey Halley said , Senior Market Analyst at OANDA.
“Fears are now growing that if China’s Omicron wave spreads to other cities, its zero-COVID policy will see prolonged mass lockdowns that will negatively impact both industrial production and domestic consumption,” said Reuters, citing it.
International Energy Agency (IEA) member countries will release 60 million barrels over the next six months, with the United States matching that amount as part of its 180 million barrel release announced in March. The moves are intended to make up for a shortage of Russian crude after Moscow was hit with heavy sanctions following its invasion of Ukraine.
“We expect these Strategic Petroleum Reserve (SPR) volumes – approximately 273 million barrels total and 1.3 million barrels per day (mbd) over the next six months – to go a long way in the short term to offset the 1 mbd of Russian oil. We expect supply to remain permanently offline,” JP Morgan analysts said in a note.
However, it is unclear whether this will fully compensate for the lack of Russian oil as exports continue as India, lured by steep discounts, increases imports.
President Joe Biden will meet Indian Prime Minister Narendra Modi virtually on Monday, the White House said, at a time when the United States has made clear it does not want to see an increase in Russian energy imports from India. .
In the United States, energy companies last week added oil and gas rigs for the third week in a row as Washington seeks to boost production to help its allies wean off Russian oil and gas.