West Texas Intermediate dropped 3.58 percent while global benchmark Brent slid 3.2 percent.
Oil declined in tandem with equities as China’s stringent measures to curb Covid-19 threatened a further hit to economic activity and fuel demand.
West Texas Intermediate futures slid 3.4% as data showing a sharp economic contraction in the world’s top oil importer outweighed growing expectations that Europe may agree to curb crude purchases from Russia. Beijing is set to close gyms and cinemas over the Labor holiday that lasts through Wednesday, and Shanghai will keep virus measures in place.
- WTI for June delivery traded down $3.58 at $101.11 a barrel on the New York Mercantile Exchange at 8:41 a.m. local time.
- Brent for July settlement slipped 3.2% to $103.73 on the ICE Futures Europe exchange.
“China growth concerns are a key driver, coming on top of general risk-averse sentiment and signs that high fuel prices are already causing demand destruction,” said Ole Sloth Hansen, head of commodities research at Saxo Bank A/S.
Meanwhile, the European Union is set to propose a ban on Russian imports by the end of the year, with restrictions on shipments introduced gradually until then. While Germany said it could end its dependence on Russia by summer, Hungary signaled it would veto any sanctions on Russian energy.
Oil climbed for a fifth month in April, marking the longest monthly winning streak since January 2018. Russia’s invasion of Ukraine has spurred inflation, and led the U.S. and its allies last month to agree on a coordinated release of strategic crude reserves to ease surging energy prices. The war has also sparked a rally in diesel prices in the U.S.
Crude remains in a bullish backwardated pattern with near-term prices above longer-dated ones, though differentials have narrowed since early March. Brent’s prompt spread — the gap between its two nearest contracts — was $1.60 a barrel, down from $3.88 on March 8.
- The Iraqi army said several rockets targeted the refinery of Kar Company in Kurdistan on Sunday evening. While the attack led to a fire at one of the facility’s main oil storage sites, it was later brought under control.
- OPEC+ will likely ratify another modest production increase when the group gathers this week, with shipments continuing to flow from Moscow.
- Saudi Arabia’s economy grew at the fastest pace in more than a decade in the first quarter, thanks largely to booming oil prices and increasing output.
- Proposed EU sanctions haven’t made clear what ‘Russian oil’ actually is, Julian Lee writes.