Andrey Rudakov | Bloomberg | beautiful pictures
Oil fell more than 7% in Monday morning trading on Wall Street on concerns about New lock in China and the potential impact on demand causing prices to drop.
West Texas Intermediate Crude Oil Futures, the US oil benchmark, were down $8.89 or 7.8%, trading at $105.01 a barrel at 10:00 a.m. on Wall Street. International standard Brent Crude Oil traded 7.4% lower at $111.61 a barrel.
“Today’s slide is primarily due to demand concerns as the Chinese capital Shanghai has been partially locked down,” 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 country uses about 15 million barrels a day and imports 10.3 million barrels a day by 2021, according to Andy Lipow, president of Lipow Oil Associates.
“The magnitude of [the] The sell-off reflects concerns that the Covid lockdown in China could spread, significantly impacting demand at a time when the oil market is trying to find alternatives to Russian oil supplies.” , Mr. Lipow said Monday.
Another round of peace talks between Ukraine and Russia is scheduled for this week, which Commerzbank said also contributed to the slide in oil prices.
Crude oil is having its first positive week in three weeks, with WTI and Brent prices ending the week 8.79% and 10.28% higher, respectively.
The oil market has been marked by extreme volatility since Russia invaded Ukraine in late February. Prices rose above $100 per barrel on the day of the invasion and continued to rise. WTI topped $130, rising to its highest level since 2008, while Brent almost hit $140.
But the price didn’t stay there for long and on March 14 WTI was trading below $100. The volatile action partly reflects the many unknowns surrounding the future of Russian oil.
The International Energy Agency warns that Russia’s oil production three million barrels per day is at risk in April when Western sanctions drive buyers away from the country’s oil. But analysts note that Russian oil is still looking for buyers for the time being, especially from India.
Traders said the recent volatility has also stemmed from non-energy market participants using crude oil as a hedge against inflation. In recent weeks, open interest has dropped, leaving the market vulnerable to even greater intraday volatility.
Despite Monday’s slide, oil remains above $100.
“We still expect that Brent crude will continue to rise as the market continues to price in energy supply risks amid major supply disruptions,” TD Securities said on Monday.
“The right tail in the energy market remains fat… The setup is still ripe for higher energy prices,” the company added.
