Stock Market

Global oil benchmark ends below $100 a barrel as China COVID lockdowns continue

Oil futures declined on Monday, with the global benchmark settling below the $100-a-barrel threshold for the first time since mid-March, as China’s COVID-19 lockdowns amplified worries over crude demand.

Price action
  • West Texas Intermediate crude for May delivery


    fell $3.97, or 4%, to settle at at $94.29 a barrel on the New York Mercantile Exchange, after suffering back-to-back weekly losses. Prices logged the lowest finish since Feb. 25, according to Dow Jones Market Data.

  • June Brent crude

    the global benchmark, lost $4.30, or 4.2%, to settle at $98.48 on ICE Futures Europe, the lowest front-month contract finish since March 16. Brent fell 1.5% last week to leave it down 14.8% over the last two weeks.

  • May gasoline

    declined by 4.1% to $3.003 a gallon and May heating oil

    shed 1.5% to $3.268 a gallon.

  • May natural gas

    settled at $6.643 per million British thermal units, up 5.8%. Prices posted their highest finish since November 2008.

Market drivers

Oil has seen volatile trade since Russia’s invasion of Ukraine in late February, with WTI briefly trading above $130 a barrel and Brent nearly touching $140 in early March. Based on most actively traded contracts, WTI had closed at $92.10 a barrel on Feb. 23, the eve of the invasion; Brent had settled at $94.05.

Oil has pulled back in recent weeks as the U.S. announced it would release 180 million barrels of crude over the next six months from its strategic reserves, with other members of the International Energy Agency adding a net 60 million barrels of releases.

China’s lockdown of Shanghai, the country’s largest city with more than 25 million people that also serves as its financial hub, has also served to pull crude prices back down, analysts said.

“WTI crude knew it was in trouble given the deteriorating crude demand outlook, stronger dollar, and after a senior U.S. administration official said President [Joe] Biden did not make a ‘concrete ask’ to India to ease up their energy purchases from Russia,” said Edward Moya, senior market analyst at Oanda, in a market update.

During a virtual meeting with Indian Prime Minister Narendra Modi on Monday, Biden made clear that he doesn’t believe it’s in India’s interests to accelerate or increase its imports of Russian energy and other commodities, White House press secretary Jen Psaki said.

At the same time, there’s “growing concern over the COVID situation in China, with it appearing as though there is no end in sight for the lockdowns that we have been seeing,” said Warren Patterson, head of commodities strategy at ING, in a note.

Still, oil prices traded off the session’s lows as the Organization of the Petroleum Exporting Countries told the European Union that current and future sanctions on Russia could create one of the worst ever oil supply shocks, Reuters reported, citing a copy of OPEC Secretary General Mohammad Barkindo’s speech to EU officials.

Barkindo also said the market may lose more than 7 million barrels per day of Russian oil and other liquids exports from current and future sanctions, or voluntary actions, the report said.

Meanwhile, natural-gas futures extended their rally after ending last week up by nearly 10%. Prices on Thursday had settled at their their highest since December 2008.

“Weather remains the primary driver for higher prices as winter refuses to release its grip on 2022,” said Christin Redmond, commodity analyst at Schneider Electric, in a Monday note.

The National Oceanic and Atmospheric Administration’s short-term forecasts predict colder-than-normal temperatures across nearly the entire U.S. through April 24, and that’s “expected to keep some heating demand online and reduce storage injections over the period,” she said.

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