Oil drops more than 7% as Shanghai shutdown raises demand concerns

Andrei Rudakov | Bloomberg | Getty Images

Oil fell more than 7% during morning trading Monday on Wall Street amid concerns New lockdowns in China The potential impact on demand led to lower prices.

West Texas Intermediate Crude Futures, the US oil benchmark, fell $8.89, or 7.8%, to trade at $105.01 a barrel at 10:00 AM on Wall Street. international standard Brent crude It was trading down 7.4% at $111.61 a barrel.

“Today’s decline in prices is attributable first and foremost to concerns about demand now that the Chinese city of Shanghai has entered a partial lockdown,” Commerzbank said Monday in a note to clients.

China is the world’s largest oil importer, so any slowdown in demand will affect prices. The nation uses about 15 million barrels per day, and imports 10.3 million barrels per day in 2021, according to Andy Lipow, president of Lipow Oil Associates.

“size [the] On Monday, Lippo said the sell-off reflected fears of the spread of COVID-19 lockdowns in China, which is significantly impacting demand at a time when the oil market is trying to find alternatives to Russian oil supplies.

Another round of peace talks between Ukraine and Russia is scheduled for this week, which Commerzbank said is also contributing to the decline in oil.

Crude oil is exiting its first positive week in the last three, with WTI and Brent crude ending the week up 8.79% and 10.28%, respectively.

The oil market has been characterized by increased volatility since the Russian invasion of Ukraine at the end of February. Prices rose above $100 a barrel on the day of the invasion and continued to rise. West Texas Intermediate crude exceeded $130, rising to its highest level since 2008, while Brent crude nearly reached $140.

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But prices didn’t stay there for long, and on March 14th WTI was trading at less than $100. The choppy business reflects, in part, the many unknowns about the future of Russian oil.

The International Energy Agency has warned that Three million barrels per day of Russian oil production at risk in April as Western sanctions prompted buyers to shy away from the country’s oil. But analysts note that Russian oil is still finding buyers for now, Especially from India.

Traders say the recent volatility also stems from non-energy market participants using crude oil as an inflation hedge. In recent weeks, open interest has declined, leaving the market subject to greater intraday volatility.

Despite Monday’s decline, oil settled above $100.

“We continue to expect Brent crude to continue rising as the market continues to price higher energy supply risks amid massive supply disruptions,” TD Securities said on Monday.

“The right tail in energy markets is still fat… Still the setup is for higher energy prices,” the company added.

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